U.S. Sens. Ron Wyden (D-OR), Sherrod Brown (D-OH), and Mark Warner (D-VA) introduced draft legislation to overhaul international taxation.
The plan would overhaul three taxes Republicans created in their 2017 tax bill – the Global Intangible Low-Taxed Income (GILTI), Foreign Derived Intangible Income (FDII) and the Base Erosion and Anti-Abuse Tax (BEAT).
Calling the Republican tax law “a massive giveaway” to large corporations, the senators noted that corporate tax revenue is down nearly 40 percent since before 2017.
“While working families have struggled to get ahead, companies that saw their taxes cut in half are doing better than ever before and paying less in taxes than any time since World War II,” Wyden, chair of the Senate Finance Committee, said. “To right the ship, we’re ending incentives to ship jobs overseas and closing loopholes that allow companies to stash their profits in tax havens. Instead, we’re going to reward companies that invest in the United States.”
Wyden added that the legislation would generate revenue to pay for priorities in Democrats’ reconciliation bill.
“Instead of bigger offshore corporate bank accounts, and more hollowed out towns across the industrial heartland, we want a tax code that leads to more American jobs and more workers joining the middle class,” Brown said. “This plan will fix our broken system that rewards companies for shipping jobs overseas, undo the damage from the Republican corporate tax handout of 2017, and allow us to invest in our greatest assets – American workers and our kids.”
To overhaul GILTI, the bill would repeal the tax exemption for foreign factories that incentivizes shipping jobs overseas, raising the GILTI rate, and moving to a country-by-country system that prevents multinational corporations from shielding income in tax havens from U.S. tax. Instead, they have proposed “high-tax exclusion” – a country-by-country approach, excluding income from countries where it is already taxed at a higher rate than GILTI.
To overhaul FDII, the senators propose ending the built-in incentive to offshore factories and other assets and equalizing the FDII and GILTI rates. The offshoring incentive will be replaced with a new provision to reward “innovation-spurring activities” in the United States.
Finally, to overhaul BEAT, the senators propose restoring the full value of tax credits for domestic investment.
“We need a system that incentivizes companies to make investments here in the U.S. in cutting-edge R&D, domestic production, and training American workers for the high-quality jobs of the future,” Warner said. “The 2017 tax law unfortunately provided incentives that do the opposite, encouraging companies to offshore operations and jobs. We need to reverse that, and to provide sufficient revenue for long-overdue investments in our economy and our workforce to meet the competitive challenges of the 21st century.”
Republicans on the Senate Finance Committee issued a statement on the proposal, saying it would create an unlevel playing field and make it more difficult for U.S. businesses to compete in the global marketplace.
“The Democrats’ plan would increase the global minimum tax on U.S. companies, introduce unworkable complexity, and make it a better deal to be based overseas than in the United States,” the Republican lawmakers’ statement said.