The Biden-Harris administration released new draft rules Thursday that could hike taxes on roughly 100 companies in the White House’s latest push to increase government tax revenues, according to the Washington Post.
The new guideline would establish a 15% minimum tax on profitable companies with more than $1 billion in income in an effort to thwart corporations’ attempts to use accounting techniques to reduce their tax bills, the outlet reported. The policy, referred to as the corporate alternative minimum tax (CAMT), ties taxation to “book income” — the income companies report to their investors on financial statements — rather than taxable income, and is expected to increase taxes by $20 billion in 2025.
“We establish a degree of tax fairness, making sure that these companies that benefit from the investments we make in the economy are helping to pay for them,” Deputy Treasury Secretary Wally Adeyemo told the Washington Post during a press briefing.
President Joe Biden secured the CAMT as part of the 2022 Inflation Reduction Act, the Washington Post reported. The policy technically took effect in 2023, but the rule is still yet to be finalized, with federal officials predicting it will not be completed until next year.
The U.S. Treasury took two years to devise the guidelines, with Steve Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center, telling Bloomberg the rulemaking process is “a massive waste of resources,” adding that the time “could have [been] better spent on other projects.”
“We’re still very much in a position of trying to actually figure out all of its implications and its implementation, which is an uncomfortable position [to be in] even several years later,” Davidson Gillette, an accounting professor at East Carolina University who co-wrote an article on the tax’s implications, told the Washington Post.
The Inflation Reduction Act revenue provisions are estimated to increase taxes by nearly $300 billion between Fiscal Year 2022 and Fiscal Year 2031, according to the Congressional Joint Committee on Taxation (JCT). Democrats claimed the tax increases would solely affect corporations and people making over $400,000 annually, but the JCT found it would also lead to tax increases for lower income brackets, estimating those making less than $10,000 would see their average tax rate increase from 7.3% in 2022 to 7.6% in 2023, those making between $30,000-$40,000 would see their rate rise from 7.8% to 7.9% and those making between $100,000-$200,000 would see a tax rate increase from 19.1% to 19.4%.
The White House did not immediately respond to a request for comment.
Featured Image Credit: The White House
