June 7, 2021
What to expect in Washington (June 7)
Support for a global tax agreement was expressed at the G7 meeting in London over the weekend, with finance ministers saying in a June 5 communique, “We commit to reaching an equitable solution on the allocation of taxing rights, with market countries awarded taxing rights on at least 20% of profit exceeding a 10% margin for the largest and most profitable multinational enterprises… We also commit to a global minimum tax of at least 15% on a country by country basis. We agree on the importance of progressing agreement in parallel on both Pillars and look forward to reaching an agreement at the July meeting of G20 Finance Ministers and Central Bank Governors.”
Asked during a news conference about the US previously calling for a 21% minimum tax, Yellen said, “the 21 percent, is what we’ve proposed to do domestically. Our domestic corporate tax proposal that’s part of the Jobs Plan is for a 28 percent corporate tax rate and a reform of our global minimum tax, to raise the level to 21 percent, and we haven’t demanded or expressed the view that it's necessary for us to have the same level globally, but we do hope that countries will be ambitious, and the agreement is at least 15 percent. So, we’ve yet to set the final rate.” On obstacles to an agreement, she said, “we feel that we have strong momentum toward a global agreement that we will reach at the G20 meeting, a preliminary agreement in July with details to be finalized in the fall. And there are a number of countries that have concerns… So, there remain details yet to be worked out, and we will be addressing those in the run up to Venice.”
Press stories have noted that Congress may be an obstacle. Treaty changes require a two-thirds vote in the Senate. “Other countries may be reluctant to change their laws or remove taxes that hit U.S.-based tech companies without seeing Congress move first,” the Wall Street Journal (WSJ) reported. “U.S. lawmakers may take the reverse view, wary of raising taxes or ceding tax authority to other nations without assurances of a complete global accord. If the U.S. raises taxes and others don’t, disadvantages could arise from having a U.S. corporate headquarters.”
Democratic tax-writers have been supportive of the Administration’s efforts, and Republican leaders skeptical. House Ways and Means Republican Leader Kevin Brady (R-TX) and Senate Finance Committee Ranking Member Mike Crapo (R-ID) issued a joint statement Friday saying, “A speculative agreement appears premature given the many unanswered questions about the Pillar 1 and Pillar 2 proposals and their potential effect on American companies and U.S. revenues. The United States enacted the most robust global minimum tax in the world in 2017. No other country has moved to enact a similar minimum tax since, and it remains to be seen whether any agreement will result in consensus from the United States’ biggest foreign competitors.”
President Biden leaves for the first overseas trip of his term Wednesday. “He’ll meet with PM Boris Johnson on Thursday and then attend the three-day G-7 meeting over the weekend in Cornwall,” Politico said.
Congress – Bipartisan infrastructure negotiations continue. President Biden and Senate Environment & Public Works (EPW) Ranking Member Shelley Moore Capito (R-WV) will talk again today. A bipartisan group of senators may soon release a plan with a carbon pricing proposal, Fox reported.
A June 6 WSJ story discussed the challenges Democrats face during the work period that begins today and lasts until the July 4th recess, on issues including “voting legislation and gun control, as well as bills that would ban discrimination on the basis of sexual orientation or gender identity and aim to end pay disparities between men and women.” Also, there are differences among Democrats on tax issues like “increasing the corporate tax rate to 28% from 21% to pay for infrastructure or raising other taxes to pay for education and antipoverty proposals. Sen. Mark Warner (D., Va.), for example, said on MSNBC last month that he ‘probably wouldn’t go as far as 28% on the corporate rate.’ Sen. Jon Tester (D., Mont.), has said he objects to changes on capital-gains taxes at death because such a move could affect farmers in his state.”
Senator Joe Manchin (D-WV) said of the Democratic voting rights bill in a June 6 op-ed that “partisan voting legislation will destroy the already weakening binds of our democracy, and for that reason, I will vote against the For the People Act. Furthermore, I will not vote to weaken or eliminate the filibuster.”
President Biden has alluded to the difficulties of moving his agenda in a closely controlled Congress, saying June 1 that he has a “majority of, effectively, four votes in the House and a tie in the Senate with two members of the Senate who vote more with my Republican friends,” understood to be moderates Manchin and Kyrsten Sinema (D-AZ), who has also stated her opposition to filibuster repeal.
The pay disparity bill is on tap for a procedural vote this week in the Senate, which is back today after a one-week recess. Following a Monday nomination vote, the Senate on Tuesday, June 8, has up to 4 votes in relation to S. 1260 (US Competition and Innovation Act), including final passage. That bill, “the most expansive industrial policy legislation in U.S. history … a nearly quarter-trillion-dollar investment in building up America’s manufacturing and technological edge,” is expected to pass by a large margin, the New York Times reported.
The House holds a committee work week, meaning hearings and other business but no floor votes.
Tax hearings – In tax-writing committees this week:
Both committees are holding budget hearings with HHS Sec. Becerra but no tax policy hearings on the budget have been scheduled.
Retirement – A June 6 Washington Post editorial addressed the Reps. Neal-Brady Securing a Strong Retirement Act of 2021 retirement bill that would “let savers wait until 73 to dip into their tax-advantaged nest eggs, starting in 2022, with that age gradually increasing to 75 by 2032. The ostensible purpose is to increase IRA ‘flexibility’ in an era when more people are delaying retirement, but the urgency of this objective is far from clear.”