Moderate Democrats Ask to Pause Global Minimum Tax
Lawmakers are asking to curtail the international tax changes included in the House Ways and Means Committee portion of a sweeping tax and spending bill written last month. This plan included increasing the minimum tax on overseas earnings for U.S. companies to 16.56%, from 10.5%. In a letter to Speaker Pelosi, Tom O’Halleran of Arizona, Henry Cuellar of Texas, and Lou Correa of California, agree that the U.S. needs to not make its move before other global legislations implement a new Global Intangible Low-Taxed Income (GILTI) regime. They also do not want the U.S. to be responsible for new rules such as country-by-country regime. Lawmakers believe that the new legislations in the Ways and Means draft could allow other countries to take advantage of them, which may cause harm to U.S. companies.
Differing arguments. While the broad outline of the agreement has the backing of nearly 140 countries worldwide, the technical details still need to be written. The global corporate tax deal, endorsed by finance ministers from the Group of 20 nations this week, calls for a 15% minimum but allows countries to have higher rates. Eliminating the international measures of the Democrats’ tax plan would scale back the revenue that lawmakers
are hoping to use to fund a major expansion in domestic social programs. The GILTI rate increase and related international changes would raise roughly $300 billion in new tax revenue, according to estimates from the Joint Committee on Taxation.
By excluding international tax changes, there is a risk of not being able to pass a higher global minimum tax in the future for the Democrats because they may not control Congress after the 2022 midterm election. House Ways and Means Committee Chair, Richard Neal, has made the opposite argument to that of the three moderates — saying that having a high-level international agreement gives the U.S. enough certainty to go forward with its own plans. Many Republicans have said they oppose increasing the offshore rate.
Neal’s proposal for a 16.56% rate is a pared-back version of Biden’s earlier tax plan, which called for a 21% rate. Democrats are hoping to pass a multi-trillion-dollar tax and spending bill by the end of the year. The bill is largely funded by tax increases on corporations and the wealthy. Narrow margins in both chambers mean that Democrats need the votes of all their caucus members in the Senate and can only afford to lose three in the House.
Talley’s team of tax professionals provide comprehensive tax compliance and consulting services so you can preserve, enhance, and pass on your assets and wealth to the next generation. We welcome the opportunity to discuss the current options available for you. For more information, contact us today.