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Politico Pro: Dozens of House Democrats urge Neal to stay strong on international tax system

Dozens of House Democrats are urging House Ways and Means Chair Richard Neal (D-Mass.) to avoid softening up proposed tax increases on U.S. multinationals.

The Democrats, led by Rep. Lloyd Doggett of Texas, the No. 2 Democrat in seniority at Ways and Means, want Congress to pass the international provisions prescribed by President Joe Biden and Treasury Secretary Janet Yellen.

Business groups have argued those proposals — including a minimum tax rate of as much as 21 percent — are too harsh and would give an edge to their competition. Even some more centrist Democratic lawmakers are worried about the U.S. moving too far on international changes and going beyond what would be required by the global tax agreement currently being negotiated through the Organization for Economic Cooperation and Development.

Want more teeth: But Doggett and the more than 40 other lawmakers on the letter warn there will be consequences if Democrats aren’t aggressive enough on making international changes and urged Neal to stay strong against corporate lobbying on the issue.

Democrats would leave large inequities in the tax code without a more robust international system, the lawmakers wrote to Neal. Plus, they argued that Democrats won’t be able to raise the kind of revenue needed to offset their proposals to strengthen the social safety net as they try to pass a big tax-and-spending measure through budget reconciliation.

“The argument that Biden’s international tax proposals will make American businesses uncompetitive makes for forceful lobbying but has no basis in fact,” the lawmakers wrote, adding that congressional Democrats could help strengthen Yellen’s hand in international negotiations by more fully backing the administration.

“The United States Congress should adopt the U.S. tax system that is best for Americans, not simply defer to a least common denominator OECD outcome,” they wrote.

The Ways and Means Committee will start considering parts of its budget reconciliation measure on Thursday, but Neal hasn’t said yet when the panel will roll out its proposed tax increases. Two other Democratic tax writers, Reps. Judy Chu and Jimmy Gomez, both of California, joined Doggett on the letter.

Other plan elements: The Biden administration has also proposed applying the existing levy on Global Intangible Low-Taxed Income, or GILTI, on a country-by-country basis — instead of averaging it across all countries in which a company does business — in addition to raising the rate to 21 percent.

On top of that, Biden and Yellen are pushing to scrap a deduction for tangible assets put into place by the 2017 GOP tax law, on what’s known as QBAI (or qualified business asset investment). They have also proposed a way to compel other countries to adopt a minimum tax, called SHIELD, or stopping harmful inversions and ending low-tax developments.

Related note: The Biden administration is trying to make a more public case for its international changes, too. A pair of top Treasury officials, Itai Grinberg and Rebecca Kysar, wrote a new post released Tuesday on why the U.S. should have a 21 percent minimum tax rate.

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