Last month, 136 of the world’s largest economic players who represent approximately 95% of the world’s economy met in Paris, France and agreed to a global minimum corporate tax of 15% (Batchelder). The purpose of this bill is to deter large corporations from avoiding their “fair share” of taxes by outsourcing operations and subsidiary firms to emerging countries with lower taxes. Given the current global supply chain issues and demand for shareholder return, multinational corporations will likely be finding ways to bring business inside the United States’ borders while utilizing domestic resources to maintain profitability.
Now, in the more recent weeks, our country’s policymakers have been hard at work as they seek to pass multiple bills in order to further “rebuild” the United States. These bills include President Biden’s $1 trillion infrastructure bill as well as an estimated $1.75 trillion Build Back Better Act, both of which may be signed in the coming weeks. The infrastructure package will allocate “$39 billion for modernizing transit and $7.5 billion for building a network of electric-vehicle chargers. It also sets aside $89.9 billion for public transit spending over the next five years” (Vanjani). The goal of this bill is to help curb the supply chain issues which are commanding news headlines and dampening firm profitability across the country.
While still in the final stages of the voting process, the Build Back Better Act includes various components. The larger spending allocations of this bill include investments in clean energy, early childhood education, healthcare reforms, and affordable housing (Vanjani). To the further dismay of multinational corporations and high-income earners, the funding of this bill will largely come from the 15% minimum corporate tax, a 1% surtax on corporate buybacks, a 5% tax rate on those earning more than $10 million, and an additional 3% surtax on income earners in excess of $25 million (Quinn and Watson). Understandably so, corporations may see stagnate profits over the next few years as they bear the brunt of the Build Back Better Act.
Yet, the underlying message of these bills is that the United States has the ability and resources to grow domestically, where up to this point corporations have been able to operate quite profitably oversees. In an ever-changing economy focused on clean energy, an equitable cost of living and health care, social equality, and so many other factors, it will be seen whether or not the US has power to maintain its standing in the world economy as the largest economic contributor. Although U.S. citizens may not see overnight results, the passing of these bills conveys a large wager on domestic, economic output in the years to come.
References:
Batchelder, Lily. “Preliminary Estimates Show Build Back Better Legislation Will Reduce Deficits.” U.S. Department of the Treasury, 4 Nov. 2021, https://home.treasury.gov/news/featured-stories/preliminary-estimates-show-build-back-better-legislation-will-reduce-deficits.
Quinn, Melissa, and Kathryn Watson. “What's in Democrats' New $1.75 Trillion Social Spending and Climate Bill?” CBS News, CBS Interactive, 29 Sept. 2021, https://www.cbsnews.com/news/budget-reconciliation-bill-build-back-better-act/.
Vanjani, Karishma. “Biden Will Sign the $1 Trillion Infrastructure Bill Soon. What Comes Next.” Barron's, Barrons, 6 Nov. 2021, https://www.barrons.com/articles/congress-infrastructure-bill-approved-biden-economic-agenda-51636212507?mod=hp_LEAD_4.