Democrats Must Resist Pressure If They Hope to Create a Fairer Tax Code
Our current tax code punishes some businesses, like brick-and-mortar retailers, while rewarding the biggest and wealthiest companies.
Lawmakers are engaged in discussions over a new tax model that bucks the old strategy of raising the corporate tax rate in favor of an alternative minimum tax. As a result, major companies are in a mad dash to lobby legislators in the hopes of carving out last-minute exceptions to benefit their interests.
Unlike traditional tax increases, a minimum tax would enforce a bottom-line percentage corporations must pay. Companies that have traditionally paid little-to-no federal taxes would finally have to pay their fair share, which is why Capitol Hill has seen a surge in lobbyists fighting the issue.
A fairer strategy with potential to raise significant revenue
With a minimum corporate tax, businesses would see more parity among corporations that currently have an uneven tax distribution due to write-offs and loopholes. By creating a minimum tax, lawmakers could target corporations that are paying nothing in taxes as opposed to squeezing more out of the businesses already paying the full corporate tax rate. This strategy has the potential to raise significant revenue, which the federal government can invest in critical sectors like infrastructure, education or national defense.
According to an analysis by Senator Elizabeth Warren's office, Amazon, the second-largest company in the United States by revenue, reduced its federal tax rate in 2020 from more than 20% to just over 11%. Had a minimum tax of 15% been in place, the ecommerce giant would have paid an additional $836 million in federal and foreign income taxes last year.
Meanwhile, as corporate giants like Amazon made every effort to avoid taxation as they raked in record profits during the pandemic, many brick-and-mortar retailers shelled out more compensation than they earned in additional profit, all while doing their best to aid America's recovery by hosting vaccination sites. Yet these companies continue to bear the brunt of the federal tax burden in the corporate sector.
While industries like computer software can use credits allotted for things such as research and development to write off nearly all their federal income taxes, the retail sector often finds it much harder to benefit from tax breaks given the lack of deductions for the industry. Additionally, retailers must pay tariffs and other expenses associated with selling physical products compared to those that sell services, software or products made and imported by other companies.
Retailers deserve a fighting chance
In 2020, 30 major retailers filed for bankruptcy, while over 9,500 storefronts across the industry shuttered. While the federal government is not responsible for America's shift towards ecommerce, which was accelerated by the pandemic, lawmakers must create fair corporate tax plans that give retailers a fighting chance by supporting policies that drive healthy competition and prevent some of the highest-grossing businesses from paying nothing.
Congressional Democrats have proposed a 15% minimum tax on businesses that make over $1 billion in profits. This change would substantially increase federal revenue and ensure some of the wealthiest corporations finally pay a fair rate, without overburdening small businesses. Democrats must resist pressure from companies looking to alter provisions in their favor and finally enact a fairer corporate tax code by passing a corporate minimum tax.
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