Democrats’ minimum corporate tax would hit these industries the hardest

Democrats are proposing a minimum tax on income that wealthy corporations report to investors in order to help fund the newest climate change and health care spending package unveiled last week.

The Inflation Reduction Act of 2022 – introduced by Senate Majority Leader Chuck Schumer, DN.Y., and Sen. Joe Manchin, DW.Va. – would impose a 15% minimum on corporations based on profits they publicly report on their financial statements to shareholders.

The levy would only apply to companies that reported more than $1 billion in income. Democrats said the levy would affect around 200 of the country’s largest corporations – with profits exceeding $1 billion – that share less than the current 21% rate for businesses. Schumer and Manchin estimated the tax would generate about $313 billion in new revenue over the next decade.

“Tax fairness is vital to our nation’s economic future,” Manchin said in a statement. “It is wrong that some of America’s largest companies pay nothing in taxes while freely enjoying the benefits of our nation’s military security, infrastructure and rule of law.”

US ECONOMY ENTERS TECHNICAL RECESSION AFTER GROWTH TUMBLES 0.9% IN THE SECOND QUARTER

Night falls at the Capitol in Washington, Dec. 2, 2021. (AP Photo/J. Scott Applewhite / AP Newsroom)

But the tax would be disproportionately borne by certain industries, according to a previous analysis of the proposal conducted by the nonpartisan Tax Foundation, which advocates for lower taxes.

The coal industry would face the heaviest burden under the book tax minimum, seeing a net tax hike of 7.2% of its pre-tax book income. That would be followed by automobile and truck manufacturing, which faces a 5.1% tax hike. In dollar terms, the industries that would account for the largest book minimum tax assets are utilities ($43.3 billion) and communication ($30.6 billion).

These industries see a sharper impact because they are at the intersection of the different book tax gaps targeted by Congress.

STRATEGISTS, TAX EXPERTS WEIGH IMPLICATIONS OF MANCHIN-BACKED BILL ON MIDTERM ELECTIONS

Lawmakers are looking to go after permanent discrepancies between the two measures from firms paying low taxes, but the proposal will more severely affect businesses with temporary timing differences between financial and taxable income; deliberate tax incentives created by Congress (such as bonus depreciation); and special items that show up in one income definition but not the other, the Tax Foundation said.

You s.  Joe Manchin and Chuck Schumer

Joyful. Joe Manchin talks with Senate Majority Leader Charles Schumer before a bill signing at the Eisenhower Executive Office Building on March 15, 2022, in Washington. (Chip Somodevilla/Getty Images / Getty Images)

“The book minimal tax affects industries very differently, some of which may be unintended, reflecting a tax proposal that has not been fully vetted,” the Tax Foundation wrote in its analysis. “Before introducing a new tax on book income, and asking the IRS to administer it and taxpayers to comply with it, lawmakers should consider whether these disparate impacts by industry are consistent with their tax policy goals.”

Revenue raised by the policies would go toward initiatives designed to combat climate change and curb pharmaceutical prices, as well as efforts to reduce the nation’s $30 trillion debt. It includes about $433 billion in new spending, while roughly $300 billion of the new revenue raised would go toward paying down the nation’s deficit, a priority for Manchin.

CLICK HERE TO READ MORE ON FOX BUSINESS

The bill’s future remains uncertain in the 50-50 Senate, but if passed, it would amount to one of the largest tax hikes in decades.

Leave a Comment

Your email address will not be published.