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    Pastries and Persuasion: How a Global Tax Deal Got Done

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    Over Zoom calls from basements and a breakfast in Brussels, faltering negotiations to remake the world’s tax architecture were revived.WASHINGTON — Over a two-hour breakfast of tea and pastries at the Hotel Amigo in Brussels in July, Treasury Secretary Janet L. Yellen tried to persuade Paschal Donohoe, the Irish finance minister, to abandon Ireland’s rock bottom corporate tax rate and join the global deal the Biden administration was racing to clinch.The closing pitch was simple: Ireland cannot go back in time. The days of American companies moving their headquarters to Ireland for tax purposes were largely over, and more than 100 countries had already agreed in principle to join the agreement.That meeting kicked off a three-month push to hash out the most sweeping changes to the international tax system in a century, which culminated in an agreement that President Biden and other leaders of the Group of 20 nations are expected to complete this week in Rome. The deal has become crucial to Mr. Biden’s domestic agenda, with the White House and Democrats in Congress now relying on revenue from a new 15 percent global minimum tax and other changes to help pay for the expansive spending package still being negotiated.Getting to yes was not easy. In the end, the United States had to convince Ireland that its economy would be better off raising its cherished 12.5 percent corporate tax rate and joining rather than remaining a tax haven and leaving the global tax system under a cloud of uncertainty. With the European Union needing all 27 nations to be on board, the pressure was on to get Ireland to come around.Officials from countries involved in the negotiations said the outcome was not clear until hours before the Organization for Economic Cooperation and Development announced on Oct. 8 that Ireland and two other holdouts — Estonia and Hungary — had joined the pact.Nearly 140 countries agreed to adopt a global minimum tax of 15 percent and settled on terms to tax large, profitable multinational corporations based on where their goods and services are sold, rather than where they operate. The agreement aims to end corporate tax havens that have for decades siphoned tax revenue away from governments, leaving infrastructure and public health needs languishing.“I think the world had come to understand that at the end of the day, all the countries trying to raise tax revenue are the losers, the companies are the winners, and the workers are the losers,” Ms. Yellen said in an interview on Tuesday. “No country really feels it can act independently to raise taxes because its firms will be uncompetitive, so the only way to do this is to hold hands and say enough is enough.”The deal is a signature achievement for Ms. Yellen, who has spent the past eight months trying to persuade nations to agree on a global tax pact that sputtered during the Trump administration.The push to reach a deal stemmed from the administration’s concerns about a global race to the bottom on corporate taxation, a phenomenon that was viewed as a big obstacle to Mr. Biden’s plan to increase corporate taxes domestically.The administration viewed persuading the rest of the world to set a global minimum tax as crucial to its own plans to raise the corporate tax rate to 28 percent, since that would minimize any competitive disadvantage. The Treasury Department estimated that its international tax plans could raise $700 billion in tax revenue over a decade.To show that the new administration was taking the negotiations seriously, Ms. Yellen told her counterparts in February that she was abandoning a Trump administration stance that would have effectively blocked other countries from imposing new taxes on American companies. She offered a plan that would allow the world’s richest companies, regardless of where they are based, to face new taxes in exchange for the removal of digital services taxes.“It had been a show stopper in these negotiations that had been going on for many years,” Ms. Yellen said.The next big obstacle was settling on a rate. The United States wanted a minimum tax of 21 percent, very likely a nonstarter for a country such as Ireland, which has relied on its 12.5 percent tax rate to attract international investment. In May, the United States agreed to continue negotiations on the basis that the rate would be “at least” 15 percent — while hoping to nudge it higher.“The turning point has been the support of the American administration,” Bruno Le Maire, France’s finance minister, told The New York Times this month.Mr. Grinberg, a tax law professor at Georgetown University, worked in the Treasury Department during the Bush and Obama administrations.Lexey Swall for The New York TimesTo get the deal over the finish line, Ms. Yellen relied on two tax experts, Itai Grinberg and Rebecca Kysar, whom she tapped in early February and describes as “invaluable” partners in navigating international negotiations.Mr. Grinberg, a tax law professor at Georgetown University who worked in the Treasury Department during the Bush and Obama administrations, was initially viewed with skepticism by some progressives, who noted that in 2016 and 2017, he lamented America’s “singularly high corporate tax rate” during congressional hearings and called for the rate to be slashed in favor of a consumption tax.But in early 2020, Mr. Grinberg wrote in a Foreign Affairs essay that European digital services taxes could open a dangerous front in the Trump administration’s tariff wars and warned that the “decay of the century-long international tax order is likely to accelerate” without a deal. Later that year, Mr. Grinberg alerted Mr. Biden’s campaign advisers on how their international tax proposals meshed with the stalled discussions of a global minimum tax. After the election, he joined Mr. Biden’s transition team.Ms. Kysar, a professor at the Fordham School of Law and a tax treaty expert, has been a vocal critic of the 2017 Republican tax overhaul. In 2018, she told the Senate Finance Committee that the law’s international tax provisions “fundamentally botched general business taxation.” Ms. Kysar had collaborated on research with David Kamin, deputy director of the White House’s National Economic Council, who helped recruit her to join the transition team and administration.With the Treasury Department working remotely, Mr. Grinberg and Ms. Kysar spent months juggling Zoom meetings with officials from finance ministries around the world and fielding calls with tax directors from America’s largest companies, which have been anxious about what the agreement will mean for their tax bills.Working from their basements in Washington and Connecticut, they regularly exchanged emails in real time during negotiations, but they had never met until they traveled to a gathering of finance ministers in Venice in July. At such summits, they would often employ a divide and conquer approach, with Ms. Kysar joining Ms. Yellen in meetings with her counterparts and Mr. Grinberg negotiating separately with Irish tax officials.The final months of negotiations centered on the United States and Ireland, but with moving parts falling in and out of place from Peru to India, which threatened to back out of the deal shortly ahead the announcement.Ms. Yellen’s approach with Ireland was to cajole more than to pressure.“Where once upon a time this tax advantage may have been important to Ireland, Ireland has built a really strong economy with a very well educated labor force,” Ms. Yellen said. “It is an extremely attractive base for American multinationals to choose as their E.U. headquarters.”In a call with Ms. Yellen in early September, Mr. Donohoe said that the deal hinged on the United States agreeing to drop language suggesting the rate could be higher than 15 percent.Ms. Yellen signed off on removing the “at least” 15 percent language, yet what Mr. Donohoe would do was still not clear. That was, until Oct. 7, when he called Ms. Yellen and Ms. Kysar to say that Ireland was in.Ms. Kysar, a professor at the Fordham School of Law , is an expert in international tax treaties.Lexey Swall for The New York Times“Ireland is a country that believes that smaller economies like our own do need to be competitive,” Mr. Donohoe said in an interview. “But we also know that for economies like our own, for societies like our own, we deeply value cooperation, we deeply value compromise.”To demonstrate American solidarity, Ms. Yellen will visit Dublin next month.The next steps could be even more challenging. A deal among countries does not mean there is agreement within those nations, including the United States, which will need to change America’s tax code and potentially rewrite tax treaties to comply with the agreement. That could require Republican support, which is not guaranteed. Top House and Senate Republicans have assailed the pact, calling the deal a “surrender.” More

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    How House Democrats Plan to Raise $2.9 Trillion for a Safety Net

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    Details of the legislation show higher taxes for companies and the wealthy, but key elements differ from the Senate and White House proposals.WASHINGTON — Top Democrats on Monday released legislation that would raise as much as $2.9 trillion to finance President Biden’s social safety net package through a series of tax changes, including increasing the amount that the wealthiest Americans and corporations pay in taxes.The legislation, released by the House Ways and Means Committee, amounts to an opening offer as Democrats in both the House and Senate try to cobble together pieces of Mr. Biden’s $3.5 trillion economic package, which would fund climate provisions, paid family leave and public education.The House bill proposes tax increases on wealthy corporations as well as individuals. But elements of the proposal are markedly different from what Mr. Biden initially proposed and what Senate Democrats have floated.Moderate and conservative Democrats have balked at the $3.5 trillion price tag and certain proposed revenue provisions, even as their liberal counterparts warn that they have already compromised on the package’s scope.Given that the Democrats plan to pass the bill along party lines, those differences will need to be worked out in the coming days. Party leaders have said they hope to reconcile the competing interests in the two chambers as much as possible before the legislation reaches the House floor.Here is what the House Ways and Means Committee, led by Representative Richard E. Neal of Massachusetts, proposed, and how it compares with other proposals from the White House and the Senate.The wealthiest would see their taxes go up.House Democrats proposed raising the top tax rate on wealthy individuals to 39.6 percent from the current 37 percent. The new rate would kick in for married couples who have taxable income over $450,000 and single people who make more than $400,000.The increase, which mirrors what Mr. Biden proposed in May, would take effect at the end of December and revert the top tax rate to what it was before Republicans passed their 2017 tax cuts. The House plan would also increase the top capital gains rate to 25 percent from 20 percent, a far smaller increase than the near doubling Mr. Biden has suggested.The wealthiest — those with an adjusted gross income of than $5 million — would also face a new surtax of 3 percent under the House plan. While Mr. Biden has not proposed such a levy, Senate Democrats have suggested an even broader wealth tax than the House, proposing a one-time surtax on billionaires’ fortunes, followed by annual levies on the gains in value of billionaires’ assets.The House plan is less aggressive than those of the White House and the Senate in other ways, including when it comes to taxing inheritances. Some top Senate Democrats want to tax inherited assets based on the gain in value from when those assets were initially acquired, rather than what they are worth at the time of death. Moderate Democrats have complained that would unfairly affect smaller family farms and businesses, and the House bill does not include such a plan.Senator Joe Manchin III of West Virginia, a key moderate Democrat, on Sunday reiterated that he would support raising the corporate tax rate to 25 percent from 21 percent now.Stefani Reynolds for The New York TimesCorporate taxes would rise.Mr. Biden has suggested raising the corporate tax rate to 28 percent, a significant increase from its current level of 21 percent but still lower than the 35 percent rate that was in effect before the 2017 tax cuts. House Democrats instead proposed a graduated rate structure, with an increase to 26.5 percent for companies with taxable income of more than $5 million.The tax rate would remain at 21 percent for companies with income of more than $400,000, and drop to 18 percent for the smallest businesses, those with income of less than $400,000. For vulnerable moderate Democrats facing political backlash for supporting tax increases, that decrease could be a crucial distinction for whom they want to target with those provisions..css-1xzcza9{list-style-type:disc;padding-inline-start:1em;}.css-3btd0c{font-family:nyt-franklin,helvetica,arial,sans-serif;font-size:1rem;line-height:1.375rem;color:#333;margin-bottom:0.78125rem;}@media (min-width:740px){.css-3btd0c{font-size:1.0625rem;line-height:1.5rem;margin-bottom:0.9375rem;}}.css-3btd0c strong{font-weight:600;}.css-3btd0c em{font-style:italic;}.css-1kpebx{margin:0 auto;font-family:nyt-franklin,helvetica,arial,sans-serif;font-weight:700;font-size:1.125rem;line-height:1.3125rem;color:#121212;}#NYT_BELOW_MAIN_CONTENT_REGION .css-1kpebx{font-family:nyt-cheltenham,georgia,’times new roman’,times,serif;font-weight:700;font-size:1.375rem;line-height:1.625rem;}@media (min-width:740px){#NYT_BELOW_MAIN_CONTENT_REGION .css-1kpebx{font-size:1.6875rem;line-height:1.875rem;}}@media (min-width:740px){.css-1kpebx{font-size:1.25rem;line-height:1.4375rem;}}.css-1gtxqqv{margin-bottom:0;}.css-19zsuqr{display:block;margin-bottom:0.9375rem;}.css-12vbvwq{background-color:white;border:1px solid #e2e2e2;width:calc(100% – 40px);max-width:600px;margin:1.5rem auto 1.9rem;padding:15px;box-sizing:border-box;}@media (min-width:740px){.css-12vbvwq{padding:20px;width:100%;}}.css-12vbvwq:focus{outline:1px solid #e2e2e2;}#NYT_BELOW_MAIN_CONTENT_REGION .css-12vbvwq{border:none;padding:10px 0 0;border-top:2px solid #121212;}.css-12vbvwq[data-truncated] .css-rdoyk0{-webkit-transform:rotate(0deg);-ms-transform:rotate(0deg);transform:rotate(0deg);}.css-12vbvwq[data-truncated] .css-eb027h{max-height:300px;overflow:hidden;-webkit-transition:none;transition:none;}.css-12vbvwq[data-truncated] .css-5gimkt:after{content:’See more’;}.css-12vbvwq[data-truncated] .css-6mllg9{opacity:1;}.css-qjk116{margin:0 auto;overflow:hidden;}.css-qjk116 strong{font-weight:700;}.css-qjk116 em{font-style:italic;}.css-qjk116 a{color:#326891;-webkit-text-decoration:underline;text-decoration:underline;text-underline-offset:1px;-webkit-text-decoration-thickness:1px;text-decoration-thickness:1px;-webkit-text-decoration-color:#326891;text-decoration-color:#326891;}.css-qjk116 a:visited{color:#326891;-webkit-text-decoration-color:#326891;text-decoration-color:#326891;}.css-qjk116 a:hover{-webkit-text-decoration:none;text-decoration:none;}The fate of the proposal is unclear in the Senate. Senator Joe Manchin III of West Virginia, a key moderate Democrat, on Sunday reiterated that he supported raising the corporate tax rate to 25 percent, and other Democrats have expressed concerns about hurting American businesses.“The number would be what’s going to be competitive in our tax code,” Mr. Manchin said, speaking on CNN’s “State of the Union.” Other moderate Democrats have concerns about the increase for businesses.Senate Democrats, led by Ron Wyden of Oregon, the chairman of the Finance Committee, have championed plans that would impose another set of taxes on big companies, including one on corporations that buy back their stocks to boost share prices.A weakened international tax overhaul.The Biden administration has led a global effort to crack down on profit shifting by companies that locate their headquarters in countries with low rates to reduce their tax bills. The measure unveiled by House Democrats on Monday waters down some of what the White House has been pushing for, including the rate that companies would pay on their overseas profits.The legislation calls for a tax rate of 16.6 percent on corporate foreign earnings. That would be an increase from the current rate of about 10.5 percent, which Republicans enacted as part of their 2017 tax legislation, but less than the 21 percent that the Biden administration proposed. The tax would be calculated on a country-by-country basis.The House proposal also offers more generous exclusions than what the White House envisioned. Companies could exclude 5 percent of their foreign tangible assets, such as property and equipment, from the minimum tax. While that is less than the current 10 percent, the Biden administration wanted to cut that benefit entirely.Still, the House proposal would put the United States more closely in line with the rest of the world, which has been coalescing around an agreement that would set a global minimum tax rate of at least 15 percent. Critics have argued that a rate of 21 percent in the United States would put American companies at a competitive disadvantage.The Committee for a Responsible Federal Budget, a fiscal watchdog, called the Ways and Means Committee international tax proposal “less aggressive” than what the White House proposed and projected it would raise about $360 billion in revenue compared with the $1 trillion that the White House plan would raise..css-1xzcza9{list-style-type:disc;padding-inline-start:1em;}.css-3btd0c{font-family:nyt-franklin,helvetica,arial,sans-serif;font-size:1rem;line-height:1.375rem;color:#333;margin-bottom:0.78125rem;}@media (min-width:740px){.css-3btd0c{font-size:1.0625rem;line-height:1.5rem;margin-bottom:0.9375rem;}}.css-3btd0c strong{font-weight:600;}.css-3btd0c em{font-style:italic;}.css-w739ur{margin:0 auto 5px;font-family:nyt-franklin,helvetica,arial,sans-serif;font-weight:700;font-size:1.125rem;line-height:1.3125rem;color:#121212;}#NYT_BELOW_MAIN_CONTENT_REGION .css-w739ur{font-family:nyt-cheltenham,georgia,’times new roman’,times,serif;font-weight:700;font-size:1.375rem;line-height:1.625rem;}@media (min-width:740px){#NYT_BELOW_MAIN_CONTENT_REGION .css-w739ur{font-size:1.6875rem;line-height:1.875rem;}}@media (min-width:740px){.css-w739ur{font-size:1.25rem;line-height:1.4375rem;}}.css-9s9ecg{margin-bottom:15px;}.css-16ed7iq{width:100%;display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-align-items:center;-webkit-box-align:center;-ms-flex-align:center;align-items:center;-webkit-box-pack:center;-webkit-justify-content:center;-ms-flex-pack:center;justify-content:center;padding:10px 0;background-color:white;}.css-pmm6ed{display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-align-items:center;-webkit-box-align:center;-ms-flex-align:center;align-items:center;}.css-pmm6ed > :not(:first-child){margin-left:5px;}.css-5gimkt{font-family:nyt-franklin,helvetica,arial,sans-serif;font-size:0.8125rem;font-weight:700;-webkit-letter-spacing:0.03em;-moz-letter-spacing:0.03em;-ms-letter-spacing:0.03em;letter-spacing:0.03em;text-transform:uppercase;color:#333;}.css-5gimkt:after{content:’Collapse’;}.css-rdoyk0{-webkit-transition:all 0.5s ease;transition:all 0.5s ease;-webkit-transform:rotate(180deg);-ms-transform:rotate(180deg);transform:rotate(180deg);}.css-eb027h{max-height:5000px;-webkit-transition:max-height 0.5s ease;transition:max-height 0.5s ease;}.css-6mllg9{-webkit-transition:all 0.5s ease;transition:all 0.5s ease;position:relative;opacity:0;}.css-6mllg9:before{content:”;background-image:linear-gradient(180deg,transparent,#ffffff);background-image:-webkit-linear-gradient(270deg,rgba(255,255,255,0),#ffffff);height:80px;width:100%;position:absolute;bottom:0px;pointer-events:none;}.css-uf1ume{display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-box-pack:justify;-webkit-justify-content:space-between;-ms-flex-pack:justify;justify-content:space-between;}.css-wxi1cx{display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-flex-direction:column;-ms-flex-direction:column;flex-direction:column;-webkit-align-self:flex-end;-ms-flex-item-align:end;align-self:flex-end;}.css-12vbvwq{background-color:white;border:1px solid #e2e2e2;width:calc(100% – 40px);max-width:600px;margin:1.5rem auto 1.9rem;padding:15px;box-sizing:border-box;}@media (min-width:740px){.css-12vbvwq{padding:20px;width:100%;}}.css-12vbvwq:focus{outline:1px solid #e2e2e2;}#NYT_BELOW_MAIN_CONTENT_REGION .css-12vbvwq{border:none;padding:10px 0 0;border-top:2px solid #121212;}.css-12vbvwq[data-truncated] .css-rdoyk0{-webkit-transform:rotate(0deg);-ms-transform:rotate(0deg);transform:rotate(0deg);}.css-12vbvwq[data-truncated] .css-eb027h{max-height:300px;overflow:hidden;-webkit-transition:none;transition:none;}.css-12vbvwq[data-truncated] .css-5gimkt:after{content:’See more’;}.css-12vbvwq[data-truncated] .css-6mllg9{opacity:1;}.css-qjk116{margin:0 auto;overflow:hidden;}.css-qjk116 strong{font-weight:700;}.css-qjk116 em{font-style:italic;}.css-qjk116 a{color:#326891;-webkit-text-decoration:underline;text-decoration:underline;text-underline-offset:1px;-webkit-text-decoration-thickness:1px;text-decoration-thickness:1px;-webkit-text-decoration-color:#326891;text-decoration-color:#326891;}.css-qjk116 a:visited{color:#326891;-webkit-text-decoration-color:#326891;text-decoration-color:#326891;}.css-qjk116 a:hover{-webkit-text-decoration:none;text-decoration:none;}Tobacco and nicotine could face new taxes.House Democrats included legislative language that would double the existing excise tax on cigarettes, small cigars and roll-your-own tobacco, as well as imposing taxes on any non-tobacco nicotine products, like e-cigarettes.That proposal could run afoul of Mr. Biden’s pledge to not raise taxes on families making less than $400,000. In negotiations over the $1 trillion bipartisan infrastructure package, Mr. Biden and his main deputies refused to consider raising the gas tax to help pay for the plan, largely because such a tax would affect anyone who buys gas, regardless of income level. That same problem would accompany an increased tax on tobacco and nicotine as well.A White House official, speaking on condition of anonymity, characterized the provision as a new idea from Capitol Hill and argued that because smoking is not a required cost, as gas or other household items are, it did not violate the pledge.Representative Tom Suozzi, Democrat of New York, issued a statement expressing confidence that a change to the cap on state and local tax, or SALT, deductions would ultimately be included in the package. He has stood behind a mantra of “No SALT, no deal.” Stefani Reynolds for The New York TimesThe SALT cap has yet to be addressed.Democrats from high-tax cities and states have agitated for months to address a limit on how much taxpayers can deduct in state and local taxes, after the 2017 Republican tax changes imposed a cap of $10,000.None of the tax proposals so far have formally addressed a partial or full repeal of that limit, although it has support in both chambers and Senator Bernie Sanders, the Vermont independent in charge of the Budget Committee, has signaled openness to a partial repeal of the cap.And while it was left out of the legislation released on Monday, Mr. Neal and two Democratic advocates for the proposal, Representatives Bill Pascrell of New Jersey and Tom Suozzi of New York, issued a statement pledging that “we are committed to enacting a law that will include meaningful SALT relief that is so essential to our middle-class communities.”Mr. Suozzi, who has stood behind a mantra of “No SALT, no deal,” issued his own statement expressing confidence that a change to the limit would ultimately be included in the package. Some liberal Democrats, however, have pushed back against its inclusion because of its cost and because it could counter some of their tax increases on the wealthy.The I.R.S. would get more money but little new power.House Democrats are prepared to spend billions of dollars to beef up the enforcement capacity of the Internal Revenue Service. The legislation adopts the Biden administration’s plan to spend $80 billion to invest in the agency, allowing it to hire more agents and to overhaul its creaky technology.The plan would also bulk up the I.R.S. budget to engage in complex and expensive legal disputes with taxpayers who are not paying what they owe.One big omission from the proposal, however, is the Biden administration’s plan to adopt a new information reporting system that would let the I.R.S. have greater visibility into the finances of taxpayers. Critics have called this an invasion of privacy.But without that new system, the plan to narrow the so-called tax gap becomes much less bold. The Biden administration estimated that it could raise $700 billion in revenue by empowering the I.R.S., but by merely bolstering enforcement, the plan would raise about $200 billion over that time, the Congressional Budget Office said. More

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    In Social Policy Bill, Businesses See a Lot to Like. They Oppose It.

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    Resistance to tax increases outweighs the appeal of a $3.5 trillion measure containing child care credits and other items that corporations embrace.WASHINGTON — The far-reaching social policy bill under construction in Congress has much that corporate America has long sought from Washington.Federal funding for family leave would ease the burden of businesses that currently pay for it while helping those that cannot afford it compete for workers. Child care tax credits would get women back in the work force. Income supports for young families could ease upward pressure on wages.But the bill also contains plenty for corporate America to dislike — particularly the tax increases that would pay for it — and in the cold calculus of corporate lobbying, industries are working hard to bring the whole enterprise down.“It’s not fair to say we like all the spending but don’t want to pay for it. There is some investment that is more valuable than others,” said Neil Bradley, the executive vice president and chief policy officer for the U.S. Chamber of Commerce. But, he added, “ultimately we’re making the case that taken as a whole, this is economically devastating for the country and in particular members’ districts and states.”Businesses have long seen a role for the government in creating and sustaining the kind of trained, healthy work force that can keep them competitive in a global economy.Access to affordable child care and early childhood education would help parents who stopped working during the coronavirus pandemic return to the labor force. Expanded higher education aid and worker retraining could create a more flexible labor pool, programs that business groups have supported for years. Federally financed family and medical leave would help small businesses that cannot afford it compete for talent with larger businesses providing the benefit.“What’s holding back growth? Labor force participation, which hasn’t recovered; nonaffordability of child care, which is going to take the biggest leap forward that we’ve ever had; paid leave for illness and family leave,” said Representative Donald S. Beyer Jr., a Virginia Democrat who owned and ran car dealerships before his political career. “On the business side, I think it will make for a better workplace, an easier one with less tension.”Yet the Chamber of Commerce, the Business Roundtable, the National Federation of Independent Business and the National Association of Manufacturers are implacably opposed. Many have made it clear: Taxes trump policy.“We’re hearing somewhere between $1.8 and $3.5 trillion on job creators in America. That would take us back to where we were before the 2017 tax reforms,” Jay Timmons, the chief executive of the manufacturers’ association, said on CNBC. “We will oppose the bill with any of those factors in there.”That 2017 tax law, signed by President Donald J. Trump, is at the heart of the opposition. The net tax cuts were supposed to cost the Treasury Department about $1.5 trillion over 10 years, but the total tax cutting, more than $5 trillion over a decade, was far larger than the tax increases now being contemplated — though it was partly offset by other tax increases, mainly on individuals.The major business groups are divided on precisely how to respond to the emerging social policy bill, but they are united in their defense of the Trump-era tax cuts. For instance, the Retail Industry Leaders Association, in a letter to congressional leaders on Thursday, embraced a proposal by President Biden to create a corporate minimum tax, declaring, “For too long, some of the largest corporations have paid minimal or no taxes.”But retailers pleaded with lawmakers to hit other companies first before even contemplating an increase in the corporate income tax rate, which the 2017 tax cut lowered to 21 percent from 35 percent. Mr. Biden has proposed raising it to 28 percent.The social policy bill under construction in Congress has much that corporate America has long sought from Washington.Stefani Reynolds for The New York Times“This is, in many ways, just a small response to the 2017 Tax Cuts and Jobs Act bill that passed under Trump, which led to some $2 trillion in lost revenue that could have gone to the public investments that we are all calling for and everyone agrees are needed,” said Didier Trinh, the director of policy at the Main Street Alliance, a liberal small-business group that is dwarfed by the groups opposing the measure. “The corporate tax rate at 28 percent would only be halfway to the pre-Trump tax rate.”Beyond the corporate tax rate, Democrats are considering taxing business repurchasing of stocks, raising taxes on overseas profits, limiting tax write-offs for foreign investment, tightening access to a special low tax rate for partnerships and other companies that do not pay corporate income taxes, and dozens of other measures.Jeffrey Hollender, a co-founder and former chief executive of Seventh Generation, which makes “green” household and personal care products, said Congress’s progress toward what would be the most significant expansion of the social safety net since the 1960s was testing the business community’s stated commitments to social change. He said he was not surprised that the calls for change were not standing up to the reality of paying for it.“People say they’re for this new stakeholder economy, that they’re committed to sustainability,” said Mr. Hollender, now the chief executive of the liberal American Sustainable Business Council. “But at the same time, there is a system of incentives designed to maximize profits, and when those profits are threatened, businesses don’t like it.”More mainline business groups recoiled at the accusation. Mr. Bradley, of the Chamber of Commerce, agreed that parts of the Democratic vision mirrored the business lobby’s longstanding wishes. Accessible child care is a high priority, he said, and addressing climate change with investments in clean energy is overdue.“The administration was right to raise I.R.S. enforcement to close the tax gap,” he added. “We want a pro-growth tax code, but we want people to comply with that tax code.”But he said the way Democrats were addressing those issues — by hastily lumping them into one voluminous $3.5 trillion measure to be passed through a fast-track process known as reconciliation — guaranteed opposition.For instance, business groups had been working with lawmakers from both parties to try to create a paid family and medical leave program that would be paid for with a payroll tax, shared among businesses, workers and the government. To satisfy Mr. Biden’s pledge not to raise any taxes on people with incomes below $400,000, the payroll tax has disappeared, replaced by a variety of tax increases on rich people and corporations that are no longer connected to the program they are to finance.“Paid family leave, outside a reconciliation context, would require intense negotiations and trade-offs, but it wouldn’t be outside the realm of possibility that we could find a proposal that we could support,” Mr. Bradley said. “Inside reconciliation, it’s only getting worse.”The Business Roundtable, which represents the chief executives of the nation’s largest corporations, expressed a similar desire. “There is strong bipartisan support for some of these policies, and we encourage Congress to take them up through that deliberative process, not via reconciliation,” the group said in a statement.To many Democrats, that sounds like an excuse, “a tactic to avoid having to pay,” Mr. Hollender said. For many of the programs under consideration, like paid family leave, recently championed by Ivanka Trump, former President Donald J. Trump’s older daughter, bipartisan negotiations have dragged on fruitlessly for decades. Now that legislative efforts are moving forward in earnest, supporters are dropping away.Heather Boushey, a member of the White House Council of Economic Advisers, defended the broad-based approach of addressing social policy needs and paying for them with tax policies generally devised to address income inequality, not narrowly tailored as direct offsets to specific programs.“This is a pro-growth agenda, based on the notion that when the middle class does well everyone does well,” she said, “and one history will show is the right way to go.” More

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    Democrats and Lobbyists to Battle Over Tax Increases for Biden’s Social Policy Bill

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    Congressional committees this week begin drafting tax increases on the wealthy and corporations to pay for a $3.5 trillion social policy bill, but the targets are putting up a fight.WASHINGTON — Congressional Democrats always knew their battle plan for raising taxes on corporations, large inheritances and the superwealthy would not survive initial contact with the enemy.They just didn’t realize that enemy would be North Dakota-nice Heidi Heitkamp.The Democratic former senator has emerged as the smiling face of a well-financed effort to defeat a proposed tax increase that is crucial to funding the $3.5 trillion social spending bill at the heart of President Biden’s agenda. Her effort is indicative of the difficult slog ahead as the business lobby mobilizes to chip away at Democrats’ tax-raising ambitions, which some lawmakers say will have to be scaled back to maintain party unity, an assessment the White House has disputed.On Thursday, the House Ways and Means Committee is set to begin formally drafting its voluminous piece of the 10-year measure to combat climate change and reweave the nation’s social safety net, with paid family and medical leave, expanded public education, new Medicare benefits and more. The committee’s purview includes much of that social policy, but also the tax increases needed to pay for it.Democrats had hoped that the tax side would be more than notations on an accounting ledger. They regard it as an opportunity to fundamentally change policies to address growing income inequality, reduce incentives for corporations to move jobs and profits overseas, and slow the amassing of huge fortunes that pass through generations untaxed.But corporate interests, led by the U.S. Chamber of Commerce, the Business Roundtable and Americans for Tax Reform, have mobilized a multifaceted lobbying and advertising blitz to stop the tax increases — or at least mitigate them.“They’re lobbying to try to escape their obligation to pay the taxes they owe, leaving working families to pay a larger share of the burden,” Mr. Biden said at the White House on Friday. “Somebody has got to pay.”The $3.5 trillion social spending bill would help fund expanded public education.Clara Mokri for The New York TimesMembers of the Senate Finance Committee will meet this week to go over more than two dozen tax proposals. Some of them are well on their way toward inclusion in the measure, which under a complex budget process known as reconciliation would be able to pass Congress without a single Republican vote.Lobbyists expect the top individual income tax rate to return to 39.6 percent from the 37 percent rate that President Donald J. Trump’s tax cuts created in 2017. The corporate income tax rate will also rise from the 21 percent in the Trump tax cuts, though not to the 35 percent rate of the Obama years. Lawmakers say a 25 percent rate is more likely.Many Democrats are determined to tax the wealth of America’s fabulously rich, much of which goes untaxed for decades before being passed along to heirs. Currently, for instance, when large estates are passed on at death, heirs are allowed to value the stocks, real estate and other assets at the price they would fetch at the time of the original owner’s death. They pay taxes only on the gain in value from that point once the assets are sold. If the assets are not sold, they are not taxed at all..css-1xzcza9{list-style-type:disc;padding-inline-start:1em;}.css-3btd0c{font-family:nyt-franklin,helvetica,arial,sans-serif;font-size:1rem;line-height:1.375rem;color:#333;margin-bottom:0.78125rem;}@media (min-width:740px){.css-3btd0c{font-size:1.0625rem;line-height:1.5rem;margin-bottom:0.9375rem;}}.css-3btd0c strong{font-weight:600;}.css-3btd0c em{font-style:italic;}.css-1kpebx{margin:0 auto;font-family:nyt-franklin,helvetica,arial,sans-serif;font-weight:700;font-size:1.125rem;line-height:1.3125rem;color:#121212;}#NYT_BELOW_MAIN_CONTENT_REGION .css-1kpebx{font-family:nyt-cheltenham,georgia,’times new roman’,times,serif;font-weight:700;font-size:1.375rem;line-height:1.625rem;}@media (min-width:740px){#NYT_BELOW_MAIN_CONTENT_REGION .css-1kpebx{font-size:1.6875rem;line-height:1.875rem;}}@media (min-width:740px){.css-1kpebx{font-size:1.25rem;line-height:1.4375rem;}}.css-1gtxqqv{margin-bottom:0;}.css-19zsuqr{display:block;margin-bottom:0.9375rem;}.css-12vbvwq{background-color:white;border:1px solid #e2e2e2;width:calc(100% – 40px);max-width:600px;margin:1.5rem auto 1.9rem;padding:15px;box-sizing:border-box;}@media (min-width:740px){.css-12vbvwq{padding:20px;width:100%;}}.css-12vbvwq:focus{outline:1px solid #e2e2e2;}#NYT_BELOW_MAIN_CONTENT_REGION .css-12vbvwq{border:none;padding:10px 0 0;border-top:2px solid #121212;}.css-12vbvwq[data-truncated] .css-rdoyk0{-webkit-transform:rotate(0deg);-ms-transform:rotate(0deg);transform:rotate(0deg);}.css-12vbvwq[data-truncated] .css-eb027h{max-height:300px;overflow:hidden;-webkit-transition:none;transition:none;}.css-12vbvwq[data-truncated] .css-5gimkt:after{content:’See more’;}.css-12vbvwq[data-truncated] .css-6mllg9{opacity:1;}.css-qjk116{margin:0 auto;overflow:hidden;}.css-qjk116 strong{font-weight:700;}.css-qjk116 em{font-style:italic;}.css-qjk116 a{color:#326891;-webkit-text-decoration:underline;text-decoration:underline;text-underline-offset:1px;-webkit-text-decoration-thickness:1px;text-decoration-thickness:1px;-webkit-text-decoration-color:#326891;text-decoration-color:#326891;}.css-qjk116 a:visited{color:#326891;-webkit-text-decoration-color:#326891;text-decoration-color:#326891;}.css-qjk116 a:hover{-webkit-text-decoration:none;text-decoration:none;}Mr. Biden wants to have heirs to large fortunes pay taxes when the original owner dies. Those taxes would be levied on inherited assets based on the gain in value from when those assets were initially purchased.Ms. Heitkamp, who said she was recruited to the opposition campaign by the Democratic former senator-turned-superlobbyist John Breaux, is adamant that taxation upon death, regardless of wealth, is deadly politics. Ms. Heitkamp said she was finding a receptive audience among potential swing voters in rural areas, especially owners of family farms, even though Democrats say such voters would never be affected by the changes under consideration. Lobbyists already expect this piece of the estate tax changes to wash out in the lobbying deluge.“This is very consistent with my concern about revitalizing the Democratic Party in rural America,” Ms. Heitkamp said. “You may want to do this,” she said she had counseled her former colleagues, “but understand there will be risk, and risk is the entire agenda.”Even more significantly, the Finance Committee is looking at taxing the accumulated wealth of billionaires, regardless of whether it is sold. Extremely wealthy Americans like the Amazon founder Jeff Bezos would have a decade to pay a one-time tax on the value of assets like stocks that have been accruing value for years. They would then pay taxes each year on the annual gain in value of their stocks, bonds and other assets, much like many Americans pay property taxes on the annually assessed value of their homes.Another key component is the international tax code. The Biden administration has called for doubling the tax that companies pay on foreign earnings to 21 percent, so the United States complies with an international tax deal that the administration is brokering, which would usher in a global corporate minimum tax of at least 15 percent.The Organization for Economic Cooperation and Development announced in July that more than 130 countries had agreed to the new framework, which aims to eliminate tax havens and end a race to the bottom on corporate tax rates. Officials have been rushing to confirm the details before the Group of 20 leaders meet in Rome in October.Extremely wealthy Americans like the Amazon founder Jeff Bezos would have a decade to pay a one-time tax on the value of assets such as stocks that have been accruing value for years.Mandel Ngan/Agence France-Presse — Getty ImagesBut countries such as France are concerned that the United States will not be able to live up to its end of the bargain if Congress cannot raise the minimum tax.The moment of truth is approaching. Representative Lloyd Doggett of Texas, a senior Democrat on the Ways and Means Committee, and 40 other members of his party on Tuesday backed the White House. Yet some Democratic lawmakers have expressed concern that U.S. companies would still be at a competitive disadvantage if other countries enacted minimum tax rates as low as 15 percent and the United States had a higher rate.Treasury Secretary Janet L. Yellen addressed those concerns in a Twitter post on Friday.“As Congress begins to finalize their legislation, I urge them to remember the historic opportunity that we have to end the race to the bottom and finally have a foreign policy and a tax code that works for the middle class,” she wrote.Republicans are already on the attack. After the disappointing monthly jobs report on Friday, Representative Kevin Brady of Texas, the ranking Republican on the Ways and Means Committee, said the slowing economy would “only get worse if the Democrats’ trillions in tax hikes and welfare spending is rammed through Congress in September.”Senator Ron Wyden of Oregon, the chairman of the Finance Committee, said he understood that business groups and Republicans would howl that the tax increases would kill jobs, stifle the economy and hurt ordinary, struggling Americans.“The big lobbies are going to attack you under any circumstance,” he said, “and half the time they’re just making it up.”But he insisted that the politics had changed. Americans who struggled during the coronavirus pandemic can see how rich others have become. New revelations from a trove of tax records leaked to ProPublica showed that household names like Mr. Bezos and Elon Musk paid virtually no federal taxes.Other lawmakers are not so sure, especially in the House, where midterm campaigns loom and a razor-thin Democratic majority is clearly at risk. Among the most vulnerable members are those from conservative-leaning districts where tax increases are particularly unpopular.“No one wants to throw the House away,” said Representative Donald S. Beyer Jr., Democrat of Virginia, a member of the Ways and Means Committee. “We’re all mindful of our frontline candidates.”Estate and capital gains tax changes proposed by the president and embraced by Mr. Wyden are aimed at the superrich, but the campaign against them frames the issue around family farms and small businesses. Ms. Heitkamp rebuffed Mr. Wyden’s assurance that he could structure the changes to affect only the very wealthy and the gain in value of their assets without taxation.“People don’t believe that, because they believe that rich people always have the lane to get into Congress,” she said. “I get that you’re trying to deal with a huge disparity in wealth in this country, and I get that you are concerned about that for the future of America. I share the concern. Taxing unrealized capital gains is not the path forward.”Some lawmakers and tax lobbyists are already circulating a document handicapping which measures are likely to survive — and which are not. A corporate tax rate increase at home and abroad is likely to pass, though it may not be as high as some Democrats would like. So is a higher top income tax rate on individuals. Capital gains tax rates are expected to rise somewhat, though not to the ordinary income tax rate of 39.6 percent for the very rich, as Mr. Biden has proposed.A measure to increase tax law enforcement, which fell out of a separate bipartisan infrastructure bill, is likely to reappear in the reconciliation bill.But lobbyists expect the proposal to make heirs pay immediate taxes on inheritances based on asset purchase prices to fall out of the plan.They also see a straight, 15 percent minimum tax on overseas income as imperiled. Even some measures that looked like slam dunks may still be rejected because of the back-room lobbying campaign that has just begun.“They’re lobbying to try to escape their obligation to pay the taxes they owe, leaving working families to pay a larger share of the burden,” Mr. Biden said of corporate interests on Friday at the White House.Stefani Reynolds for The New York TimesThat includes closing the so-called carried interest loophole, which allows richly compensated private equity and hedge fund managers to claim the fees they charge clients as investment income, subject to low capital gains tax rates, not income tax rates. Every president since Barack Obama has denounced the provision and demanded its closure, only to lose to influential lobbyists.The U.S. Chamber of Commerce on Tuesday started a campaign to stop the loophole from being closed, saying doing so “would reduce investment, lead to widespread job losses and decrease tax revenues.” Mr. Wyden called the assertions “insulting to the intelligence of every American.”Administration officials insisted that taxing the rich and corporations would help sell the bill.“Should we let millions of children grow up in poverty in order to protect offshore tax loopholes?” Kate Bedingfield, the White House communications director, wrote to House Democrats in a memo on Tuesday. “Should we let middle-class families bear crushing costs for child care and elder care rather than asking the very richest among us to pay their fair share? Those are the questions before us.” More

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    Global Tax Overhaul Gains Steam as G20 Backs New Levies

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    The approach marks a reversal of years of economic policies that embraced low taxes as a way for countries to attract investment and fuel growth.VENICE — Global leaders on Saturday agreed to move ahead with what would be the most significant overhaul of the international tax system in decades, with finance ministers from the world’s 20 largest economies backing a proposal that would crack down on tax havens and impose new levies on large, profitable multinational companies.If enacted, the plan could reshape the global economy, altering where corporations choose to operate, who gets to tax them and the incentives that nations offer to lure investment. But major details remain to be worked out ahead of an October deadline to finalize the agreement and resistance is mounting from businesses, which could soon face higher tax bills, as well as from small, but pivotal, low-tax countries such as Ireland, which would see their economic models turned upside down.After spending the weekend huddled in the halls of an ancient Venetian naval shipyard, the top economic officials from the Group of 20 nations agreed to forge ahead. They formally threw their support behind a proposal for a global minimum tax of at least 15 percent that each country would adopt and new rules that would require large global businesses, including technology giants like Amazon and Facebook, to pay taxes in countries where their goods or services are sold, even if they have no physical presence there.“After many years of discussions and building on the progress made last year, we have achieved a historic agreement on a more stable and fairer international tax architecture,” the finance ministers said in a joint statement, or communiqué, at the conclusion of the meetings.The approach marks a reversal of years of economic policies that embraced low taxes as a way for countries to attract investment and fuel growth. Instead, countries are coalescing around the view that they must fund infrastructure, public goods and prepare for future pandemics with more fiscal firepower at their disposal, prompting a global hunt for revenue.“I see this deal as being something that’s good for all of us, because as everyone knows, for decades now, the world community, including the United States, we’ve been participating in this self-defeating international tax competition,” Treasury Secretary Janet L. Yellen said on the sidelines of the G20 summit. “I’m really hopeful that with the growing consensus that we’re on a path to a tax regime that will be fair for all of our citizens.”The agreement followed a joint statement last week that was signed by 130 countries who expressed support for a conceptual framework that has been the subject of negotiations at the Paris-based Organization for Economic Cooperation and Development for the better part of the last decade. The O.E.C.D. estimates that the proposal would raise an additional $150 billion of global tax revenue per year and move taxing rights of over $100 billion in profits to different countries.The backing of the broad framework by the finance ministers on Saturday represented a critical step forward, but officials acknowledged that the hardest part lies ahead as they try to finalize an agreement by the time the leaders of the Group of 20 nations meet in Rome in October.Among the biggest hurdles is an ongoing reluctance by low-tax jurisdictions like Ireland, Hungary and Estonia, which have refused to sign on to the pact, potentially dooming the type of overhaul that Ms. Yellen and others envision. Hungary and Estonia have raised concerns that joining the agreement might violate European Union law and Ireland, which has a tax rate of 12.5 percent, fears that it will upend its economic model, siphoning the foreign investment that has powered its economy.Absent unanimous approval among the members of the European Union, an accord would stall. Establishing a minimum tax would require an E.U. directive, and directives require backing by all 28 countries in the union. Ireland had previously hinted that they would object to or block a directive and Hungary could prove to be an even bigger hurdle given its fraught relationship with the union, which has pressed Hungary on unrelated rule-of-law and corruption issues.Prime Minister Viktor Orban of Hungary has stated that taxes are a sovereign issue and recently called a proposed global minimum corporate tax “absurd.” Hungary’s low corporate rate of 9 percent has helped it lure major European manufacturers, especially German carmakers including Mercedes and Audi.Bruno Le Maire, France’s finance minister, said on Saturday that it was important that all of Europe supports the proposal. G20 countries plan to meet with Ireland, Hungary and Estonia next week to try and address their concerns, he said.“We will discuss the point next week with the three countries that still have some doubts,” he said. “I really think the impetus given by the G20 countries is clearly a decisive one and that this breakthrough should gather all European nations together.”Policymakers also have yet to determine the exact rate that companies will pay, with the United States and France pushing to go above 15 percent, and negotiations are continuing over which firms will be subject to the tax and who will be excluded. The framework currently exempts financial services firms and extractive industries such as oil and gas, a carve-out that tax experts have suggested could open a big loophole as companies try to redefine themselves to meet the requirements for exemptions.Domestic politics could also pose hurdles for the countries that have agreed to join but need to turn that commitment into law, including in the United States, where Republican lawmakers have signaled their disapproval, saying the plan would hurt American firms. Big business interests are also warily eyeing the pact and suggesting they plan to fight anything that puts American companies at a disadvantage.“The most important thing is understanding that if there is going to be an agreement, that there cannot be an agreement that is punitive toward U.S. companies,” said Neil Bradley, the chief policy officer at the U.S. Chamber of Commerce. “And that, of course, is of great concern.”A report this month from the European Network for Economic and Fiscal Policy Research found that only 78 companies are expected to be affected by the overhaul but nearly two-thirds of them are American. The researchers estimated that the new taxes would raise $87 billion in revenue and that Apple, Microsoft, Alphabet, Intel, and Facebook would pay $28 billion of that total.At the heart of the proposal is the idea that, if countries all agree to a minimum tax, it will prevent businesses from seeking out low-tax jurisdictions for their headquarters, depriving their home countries of revenue. Ms. Yellen has criticized what she calls a “race to the bottom” in global taxation.Ms. Yellen said that she would be working in the coming months to address the concerns of countries with reservations but that the deal could still proceed even if some countries did not join. She pointed to an enforcement mechanism that would raise U.S. taxes on corporations that have headquarters in countries that continue to be tax havens but do business in America.Still, changing domestic tax laws will not be quick or easy, including in the United States, whose success in ushering in a new tax regime is being closely watched as a harbinger of whether a global overhaul can come to pass. Senior officials at the G20 meetings said that approval of the agreement within the United States was crucial to its broader acceptance.Republican lawmakers have suggested they will put up a fight.Representative Kevin Brady of Texas, the top Republican on the House Ways and Means Committee and one of the architects of the 2017 tax cuts, said that the Biden administration’s tax proposals would never pass.“Certainly in Congress there’s a great deal of skepticism,” Mr. Brady said in a telephone interview this week. “My prediction is that at the end of the day, even if an agreement is reached, what the president will bring back to Congress is an agreement that advantages foreign companies and workers over American ones.”Ms. Yellen indicated that Democrats were prepared to pass as many of the tax changes as they can through a budgetary procedure called reconciliation that would alleviate the need for Republican votes. She assured her international counterparts that the Biden administration was ready to deliver its end of the bargain and pushed back against the idea that the new tax system would harm American workers.“For the United States, it’s going to be a fundamental shift in how we choose to compete in the world economy,” Ms. Yellen said. “Not a competition based on rock-bottom tax rates, but rather on the skills of our work force, our ability to innovate and our fundamental talents.”Policymakers continue to grapple with what the global minimum tax rate will be and what exactly will be subject to the tax.A separate proposal calls for an additional tax on the largest and most profitable multinational enterprises, those with profit margins of at least 10 percent. Officials want to apply that tax to at least 20 percent of profit exceeding that 10 percent margin for those companies, but continue to debate how the proceeds would be divided among countries around the world. Developing economies are pushing to ensure that they will get their fair share.Mr. Bradley, of the Chamber, said that the details of a final agreement would determine how punitive it would be for companies. Representatives from Google and Facebook have been in touch with senior Treasury officials as the process has played out.American businesses are also worried about being put at a disadvantage by a 21 percent tax that President Biden has proposed on their overseas profits, if their foreign competitors are only paying 15 percent. The Biden administration also wants to raise the domestic corporate tax rate from 21 percent to 28 percent. Democrats in Congress are moving forward with legislation to make those changes to the tax code this year.“If a U.S. company is trying to compete globally with a significantly higher tax burden because of this significantly higher minimum tax on its operations, that’s a competitive issue for being able to be successful,” said Barbara Angus, a global tax policy leader at Ernst & Young.Washington and Europe also remain at odds over how to tax digital giants like Google and Amazon. At the G20 summit, finance ministers expressed optimism that such obstacles could be overcome. In his closing news conference after the deal was reached, Daniele Franco, Italy’s finance minister, hailed the agreement as historic and called on the countries that had yet to join to reconsider.“To accept global rules is, for each country, difficult. Each country has to be prepared to compromise,” Mr. Franco said. “To have worldwide rules for taxing multinationals, for taxing the profits of big companies is a major change, is a major achievement.”Liz Alderman More

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    Yellen Won a Global Tax Deal. Now She Must Sell It to Congress.

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    The Treasury secretary worked with finance ministers from the G7 to win support for a global minimum tax. But selling the idea to Republican lawmakers will not be easy.Treasury Secretary Janet L. Yellen secured a landmark international tax agreement over the weekend, one that has eluded the United States for nearly a decade. But with a narrowly divided Congress and resistance from Republicans and business groups mounting, closing the deal at home may be an even bigger challenge.The Biden administration is counting on more than $3 trillion in tax increases on corporations and wealthy Americans to help pay for its ambitious jobs and infrastructure proposals. Republicans have expressed opposition to any rise in taxes and have warned that President Biden’s big spending plans are fueling inflation and will deter business investment. Business groups have complained that higher taxes pose a threat to the economic recovery and will put American companies at a competitive disadvantage.Persuading members of the Group of 7 advanced economies to agree on Saturday to a global minimum tax of at least 15 percent was intended to help the Biden administration win support for its U.S. tax increases. If enacted, the global minimum tax would require that companies pay at least a 15 percent tax on income, regardless of where they are based, making it less advantageous to relocate operations to countries with lower tax rates.In an interview on Sunday, Ms. Yellen acknowledged the legislative challenge ahead and defended the Biden administration’s plans to raise taxes on corporations. She stood behind Mr. Biden’s proposal to raise the corporate tax rate in the United States to 28 percent from 21 percent.“We think it’s a fair way to collect revenues,” Ms. Yellen said on her flight back to the United States from London after attending two days of meetings with G7 finance ministers. “I honestly don’t think there’s going to be a significant impact on corporate investment.”Ms. Yellen played down the relationship between tax rates and business spending, arguing that the $1.5 trillion tax cuts that Republicans passed in 2017 did little to lift American investment. She said that the changes to the international tax code would ultimately be beneficial to U.S. firms and that even those who face higher taxes, such as Amazon, Facebook and Google, would gain from the additional certainty about their tax bills.But the fate of Mr. Biden’s proposals is not certain, and Ms. Yellen now faces the task of convincing lawmakers that large tax and spending increases will not hinder the economic recovery.Mr. Biden has been negotiating with Republican lawmakers and has expressed a willingness to narrow the scope of his tax and spending plans to rebuild the nation’s roads and bridges. The president has offered to drop his proposal to raise the corporate rate to 28 percent to secure bipartisan support, though White House officials expect to try to push that higher rate through in a separate legislative vehicle that can pass without any Republican support.Ms. Yellen acknowledged that compromise on the corporate tax rate might be necessary and said that she hoped for a bipartisan infrastructure agreement. Republicans are resisting any changes to the 2017 tax law, which cut the corporate tax rate to 21 percent.It is unclear if Republicans will support the international tax agreement, particularly a decision to impose a new tax on big, multinational corporations — even if they have no physical presence in the countries where they sell those services. That part of the agreement was offered by the United States to put to rest a fight with European countries over their digital services taxes that would hit large American technology companies.Some lawmakers have already criticized the idea as ceding taxing authority to other governments, and many business groups were still absorbing the agreement over the weekend. Ms. Yellen believes that the concept will not cost the United States much in terms of lost tax revenue. However, the fact that European countries are not dropping their digital services taxes until a deal is fully enacted has already been criticized by top Republicans in the House and Senate given it could take four years for the agreement to be put in place.If the Biden administration cannot shepherd the tax legislation through Congress, the agreement on the global minimum tax — and a separate deal that was reached on Saturday on a system for taxing large companies based on where their goods and services are sold — will be for naught. Negotiators are hoping to broaden the agreement to more countries at the Group of 20 meetings in Italy next month and then finalize a pact in October. Then countries, including the United States, will have to change their laws accordingly.The G7 summit was Ms. Yellen’s first trip abroad as Mr. Biden’s top economic diplomat. In London, Ms. Yellen received praise from her counterparts for restoring American leadership and for the Biden administration’s embrace of multilateralism after four years of President Donald J. Trump’s “America First” policies.The Treasury secretary described the job as more grueling than her previous role as chair of the Federal Reserve, pointing to the scale of the relief programs that she is overseeing and the department’s vast portfolio. An economist who has focused for years on monetary policy, Ms. Yellen is now in charge of sanctions policy, tax policy, overseeing regulators and dealing regularly with Congress.Beyond the tax negotiations, Ms. Yellen is grappling with the sensitive question of inflation and whether the president’s policies are going to stoke higher prices for a sustained period. Businesses in the United States have expressed growing concern about rising prices, along with a shortage of commodities, and a lack of available workers.Ms. Yellen maintained that she believed rising prices were a short-term issue related to the reopening of the economy and snarled supply chains. Still, the chance of a sustained jump in prices remains a concern that she is tracking closely.To determine if inflation is more than a temporary matter, Ms. Yellen is monitoring two key metrics: inflation expectations and wage increases for low-paid workers. Rising pay for the lowest-wage workers could potentially lead to “an inflationary trend” if there is broad excess demand for workers in the labor market, she warned.“We don’t want a situation of prolonged excess demand in the economy that leads to wage and price pressures that build and become endemic,” Ms. Yellen said. “Looking at wage increases, you can have a wage price spiral, so you need to be careful.”She added: “I do not see that happening now.”At the G7 meeting, Ms. Yellen raised eyebrows when she said that inflation could remain higher for the rest of the year, with rates around 3 percent. However, in the interview, she said that the comment was misinterpreted. She said that she expected inflation rates to be elevated for the next few months but then settle down to be consistent with the 2 percent rate that is the Federal Reserve’s long-term target.“I don’t see any evidence that inflation expectations are getting out of control,” Ms. Yellen said.Critics have suggested that the Biden administration’s extension of pandemic unemployment insurance is fueling the labor shortage by encouraging workers to stay at home and collect generous benefits. At least 20 states have moved to cut off benefits early to encourage people to go back to work.Ms. Yellen said the difference in how states were handling jobless benefits could shed new light on the dynamic, but that she still saw no evidence that the supplement was slowing job creation. She pointed to a lack of child care and positions that were permanently lost because of the pandemic as the more probable reason that employers in some sectors were struggling to find staff.“We wanted to support people,” Ms. Yellen said. “This isn’t something that should be in place forever.”Although the economy is improving, Ms. Yellen said that seven million jobs that were lost since the pandemic still had not been restored. Some of them might never come back.“We’re not in a tight labor market at this point,” she said. More

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    Biden Narrows Infrastructure Proposal to Win Republican Support

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    The president offered new concessions this week, including dropping his plan to reverse some of the 2017 tax cuts, as he tries to win support from Senate Republicans.WASHINGTON — President Biden offered a series of concessions to try to secure a $1 trillion infrastructure deal with Senate Republicans in an Oval Office meeting this week, narrowing both his spending and tax proposals as negotiations barreled into the final days of what could be an improbable agreement or a blame game that escalates quickly. More

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    U.S. Backs Global Minimum Tax of at Least 15% to Curb Profit Shifting Overseas

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    The Biden administration wants other countries to back a minimum tax as part of its plan to raise the U.S. corporate tax rate to 28 percent from 21 percent.The Biden administration proposed a global tax on multinational corporations of at least 15 percent in the latest round of international tax negotiations, Treasury Department officials said on Thursday, as the U.S. looks to reach a deal with countries that fear hiking their rates will deter investment. More