Biden's tax plan calls for raising the corporate income tax rate to 21% from 21%.
It would not be the highest rate for the top bracket, even though it is higher than the current rate.
Large companies have already lobbied against the plan at Capitol Hill.
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President Joe Biden wants to raise the tax rates of corporations and wealthy Americans in order to pay $3.5 trillion for a spending plan that includes universal childcare and tuition-free community colleges.
However, some corporations are not happy about it. According to the Washington Post, lobbying groups representing companies such as Apple, Disney and ExxonMobil have already begun to flock to Capitol Hill in protest of tax increases.
Biden stated that corporations and the richest people will pay more. "It's going put millions of people according all the estimates, millions to work in jobs which are going to help their punch their ticket into the middle class and stay there." And everyone will do better, even corporate America.
What is Biden's plan, and why are corporations opposed to it?
The corporate income tax rate could increase from 21% to 28 percent, which is lower than previous years.
Since 2018, the corporate tax rate has been 21%, since former President Donald Trump signed the Tax Cuts and Jobs Act of 2017, which reduced the rate from 35% for those with the highest taxable income bracket.
However, many of America's largest corporations don't pay federal income taxes due to loopholes or exemptions. Biden stated that after Friday's poor job report, "it's time they start to pay their fair part" pointing out that in 2020, at least 55 of America's largest corporations, including Salesforce and Nike, paid no federal income tax. Corporate profits saw a huge rise in the year that millions of Americans lost jobs or were concerned about their financial future.
The following chart shows that corporate profit before taxes was $1.8 billion annually during the second quarter 2020. This is less than the nearly $2 trillion annualized in its first quarter. Profits have increased since the second quarter, and reached over $3 trillion annually in the second half of this year.
Juliana Kaplan, Insider's reporter, reported that Biden is still unsure of the rate at which a corporate tax increase should be implemented. She suggested it could be between 25% and 28%.
The marginal tax rate for corporations within the top tax bracket would be lower than it was in past years. As the chart below shows, The top income bracket has been changing over the years. From 1993 to 2017, the top bracket consisted of companies with approximately $18 million in taxable income. Companies that earned more than $335,000 in taxable income between 1988 and 1992 were the highest-ranking.
To illustrate how federal corporate tax rates have changed, the chart only covers the years 1946 to 2020. The chart shows that the 2018-2020 lowest rate was after Trump's law reduced the rate from 35% down to 21%. The proposed tax increase for corporations would be more than the rate after Trump's law but it wouldn't be nearly as steep as the highest tax rate in previous years.
However, companies aren't satisfied. One group, the Business Roundtable, includes Apple CEO Tim Cook, as part of its board. They plan to stop the rise.
Josh Bolten, CEO of Business Roundtable stated that "It's an enormous tax increase on US businesses, which is really detrimental not only to the shareholders of all these businesses, but also to the employees, customers, and customers."
Biden's plan also includes additional taxes for the most wealthy Americans
Biden's plan doesn't include raising taxes for those earning less than $400,000. Individual tax rates would rise from 37% to 39.6% for those earning over $452,000. For married couples with a combined income of over 509,300, the individual tax rate would go up from 37% and 37%. The marginal tax rate will return to the previous 39.6%, which is the case for those who are at the top.
A person with a net income exceeding $1 million will have to include long-term capital gain and dividends in their ordinary, taxable income.
Clifton Painter, Tax Foundation's Clifton Painter, wrote that President Biden's proposal of taxing capital gains at higher ordinary income tax rates would cause the U.S. have the highest marginal tax rate capital gains in Organisation for Economic Co-operation and Development(OECD).
