Biden’s infrastructure plan could unfairly tax businesses in the northeast

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But the recession triggered by the coronavirus pandemic has hit these workers hard and made their futures more uncertain. Now as they try to recover President Biden Is actively pursuing a tax change that would stifle the success of US businesses, lower wages and lead to less well-paying jobs in the Northeast.

Biden’s proposal calls for the GILTI to be doubled. This law is a complex, fractured tax that US multinational corporations pay on what they sell overseas. The Republicans’ intent in founding GILTI was to prevent companies from moving their intellectual property overseas, avoid taxes, and anchor jobs in the United States.

While the wider Tax Cuts and Jobs Act of 2017 managed to eradicate these practices – known as Inversions – As GILTI made the United States more competitive, GILTI has further complicated tax laws for companies with a global business model, setting many of their effective tax rates well above the current corporate tax rate of 21 percent. Biden has proposed doubling Trump’s GILTI tax to increase revenue and keep more jobs domestically, but if successful, he would only raise tax rates on U.S. brands paying that tax – not our overseas competitors .

Worse still, the effects of doubling the federal GILTI rate would be compounded by many state tax laws across the country that automatically follow that law. This would affect itself automatic tax increases in dozens of states – including for businesses in Maine, Massachusetts, New York, Rhode Island, Vermont, and more across the Northeast.

In other words, Biden’s proposal would make Texas or Nevada more attractive than Delaware or New Hampshire to do business, and more attractive to be headquartered in Ireland than anywhere in the States.

There are ways to finance infrastructure without affecting American competitiveness or harming US workers. Usage feessuch as a gas tax, while offensive to some in Washington, is a proven way to fund large projects while allowing those who would benefit most from these plans to join the action. Alternatives like a Carbon tax could also help the president meet environmental and revenue goals without hindering Northeastern companies’ ability to sell overseas, expand their business and invest in their people.

In the end, many of these Democratic senators voted against the GILTI tax when it was passed as part of the 2017 tax reform – and there is no good reason to double it now.

Scott A. Hodge is president of the Tax Foundation, a nonprofit research organization based in Washington, DC Daniel Bunn is vice president of global projects for the Tax Foundation.



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