“The result is likely to be a deeper and longer-lasting crisis, with increasing problems of debt, entrenched poverty and growing inequality,” Ms. Yellen said, estimating that up to 150 million people could be pushed into extreme poverty this year . “It would be a profound economic tragedy for these countries that should be important to us.”
It’s about how governments should tax income that multinational corporations earn across borders. Large companies are increasingly operating in multiple countries: Amazon sells to buyers in Europe, for example, and Morgan Stanley provides financial services in China.
Because the business is spread across multiple countries, many companies are trying to reduce their tax burdens by locating operations in low-tax areas like Bermuda or Ireland, or simply by making a profit. When Republicans passed their comprehensive tax bill in 2017, proponents said it would help contain this practice and encourage domestic investment by both lowering the corporate tax rate in the United States and introducing a new system of taxing foreign income, including a measure intended to be a minimum tax on all global income.
However, Democrats say the law and the administration’s use of the tax did the opposite, giving businesses new incentives to locate factories and profits overseas. Both the plan Mr Biden drew up last week and a new proposal released on Monday by three Democratic Senators are designed to reverse these incentives, tax offshore revenues more aggressively, and companies that invest in research and production at home offer new targeted benefits.
The proposal would increase the tax rate for the 2017 minimum tax and change its application to income earned by businesses in various overseas countries. This would force many companies to pay the tax on a larger portion of their income, while offering new targeted tax breaks related to domestic investments.
The Senate plan comes from Senator Ron Wyden, Democrat of Oregon, who chairs the finance committee responsible for drafting tax legislation, and two Democratic colleagues: Senator Sherrod Brown of Ohio and Senator Mark Warner of Virginia.
The presence of Mr. Brown, one of the most progressive Democrats on taxation in the Senate, and the more centrist Mr. Warner as writers suggest that the Wyden Plan could find widespread support in a Democratic caucus that most likely cannot afford a single one Lose vote for Mr Biden’s infrastructure plan.