As the Biden administration kicks off its push to raise the corporate tax rate in an effort to pay for President Joe Biden’s proposed infrastructure plan, Treasury Secretary Janet Yellen is calling for nations worldwide to enact a global minimum to keep companies from fleeing overseas to find lower tax rates.
In a speech to the Chicago Council on Global Affairs, her first major address since her historic confirmation to lead the Treasury, Yellen said that the U.S. is working with G-20 nations to “stop the race to the bottom” — countries trying to lower tax rates in an attempt to attract companies and business.
“Competitiveness is about more than how U.S.-headquartered companies fare against other companies in global merger and acquisition bids,” she said. “It is about making sure that governments have stable tax systems that raise sufficient revenue to invest in essential public goods and respond to crises, and that all citizens fairly share the burden of financing government.”
According to the Tax Foundation, the average tax rate globally was 24% in 2020. Among G-20 nations, the average rate was nearly 27%. Former President Donald Trump lowered the rate to 21% from 35% in 2017, taking the U.S. from the highest among the 37 countries in the Organization for Economic Cooperation and Development to the 13th-highest.
President Biden wants to raise the rate to 28% in his proposed tax plan.
“Over the last four years, we have seen firsthand what happens when America steps back from the global stage,” Yellen said. “America first must never mean America alone.
“President Biden’s proposals announced last week call for bold domestic action, including to raise the U.S. minimum tax rate, and renewed international engagement, recognizing that it is important to work with other countries to end the pressures of tax competition and corporate tax base erosion,” she noted.
“Together,” Yellen said, “We can use a global minimum tax to make sure the global economy thrives based on a more level playing field in the taxation of multinational corporations, and spurs innovation, growth and prosperity.”
Yellen also said the United States will step up its efforts at home and overseas to fight climate change, “after sitting on the sidelines for four years.”
Treasury will work to “promote the flow of capital toward climate-aligned investments and away from carbon-intensive investments," Yellen said. That approach has raised the ire of GOP members of Congress, who say it threatens the ability of the U.S. oil and gas industry to access needed lending.
The Associated Press contributed to this report.