Senate Democrats release billionaire, corporate tax proposal details

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Senate Democrats release billionaire, corporate tax proposal details

Democrats’ tax proposals are beginning to take shape in Washington D.C. CNBC’s Ylan Mui joins ‘Squawk Box’ to report on the details. For access to live and exclusive video from CNBC subscribe to CNBC PRO: https://cnb.cx/2NGeIvi

New details of a Democratic plan to enact a 15% minimum corporate tax on declared income of large corporations were released Tuesday by three senators, Elizabeth Warren, D-Mass., Angus King, I-Maine, and Senate Finance Committee Chair Ron Wyden, D-Ore.

The senators will propose the tax be included as a source of revenue to help fund the massive “Build Back Better” bill that Democrats are currently negotiating.

Shortly after the plan was released a key senator in those negotiations, Arizona Democrat Kyrsten Sinema, announced that she would support the corporate minimum tax, giving the proposal a major boost.

According to a release from the senators, the corporate minimum tax would:

Apply only to companies that publicly report more than $1 billion in profits annually for a three year time period.
Create an across-the-board 15% minimum tax on those profits.
Preserve “the value of business credits – including R&D, clean energy, and housing tax credits – and include some flexibilities for companies to carry forward losses, utilize foreign tax credits, and claim a minimum tax credit against regular tax in future years.”
The tax proposal gained new focus this week after Sinema announced that she would not support raising the current corporate tax rate, which had been Democrats’ original plan to raise revenue for their social spending plan.

The tax would likely apply to about 200 American corporations, the senators said.

The Democrats did not say which business credits within the tax code would be preserved. The details of those credits would likely make a huge difference to the corporations that face the prospect of owing the tax.

According to legislative language released by Warren’s office, the Treasury Department would be tasked with determining which corporations would be subject to the tax and the finer details of its imposition.

“The most profitable corporations in the country are often the worst offenders when it comes to paying their fair share. Year after year they report record profits to shareholders and pay little to no taxes. Our proposal would tackle the most egregious corporate tax dodging by ensuring the biggest companies pay a minimum tax,” Wyden said in a statement.

They specifically referenced Amazon, which they said reported $45 billion in profits over the past three years, yet paid an “effective tax rate of just 4.3% – well below the 21% corporate tax rate.”

The proposal has yet to get a formal stamp of approval from House and Senate leaders. But Warren said she and her colleagues have “engaged extensively” with the Senate Finance Committee, the White House and the Treasury Department to develop this updated proposal for inclusion in the Build Back Better bill.

The current proposal is similar to one pitched by President Joe Biden earlier this year as part of the White House’s broader “Made In America” tax agenda.

In March, the administration called for a 15% minimum tax on the income corporations use to report their profits to investors, known as “book” income.

The White House said at the time that such a provision would “apply only to the very largest corporations” and ensure big companies can’t “exploit loops in the tax code to get by without paying U.S. corporate taxes.”

The Biden proposal differed from the current Senate proposal in a few respects. One is that the Biden plan put the income threshold at $2 billion, not $1 billion. So the Senate proposal would apply to more companies.

Biden’s plan also did not contain a three-year rule, where the tax only applies to companies that make $1 billion or more in income for three consecutive years.

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