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2020 Democrats set sights on corporate tax hike

2020 Democrats set sights on corporate tax hike
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Interest is growing among 2020 Democrats in raising the corporate tax rate back to the level where it was prior to President TrumpDonald John TrumpFive landmark moments of testimony to Congress Lindsey Graham basks in the impeachment spotlight Democrats sharpen their message on impeachment MORE’s tax-cut law.

Trump’s 2017 tax-cut law cut the corporate tax rate from 35 percent to 21 percent. While no Democrats voted for Trump’s law, a number agreed with Republicans that the 35 percent rate was too high.

But in recent weeks, some Democratic candidates across the ideological spectrum have suggested that the rate should once again be 35 percent.

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South Bend, Ind. Mayor Pete ButtigiegPeter (Pete) Paul ButtigiegPress: Another billionaire need not apply Saagar Enjeti dismisses Warren, Klobuchar claims of sexism Warren on winning over male voters: I was told to 'smile more' MORE last weekend called for restoring the corporate tax rate to where it was before the GOP tax law was enacted, in order to pay for his “Medicare for All who want it” health-care plan.

He said on “Meet the Press” that his health plan — which would automatically enroll people without health insurance but allow those with coverage through their employers to keep it or join a government plan — is estimated to cost about $1.5 trillion over 10 years. Buttigieg said $1.4 trillion of the cost could be paid for by going back to the pre-Trump level.

“The vast majority of that can be recovered by rolling back the corporate tax rate cut portion of the Trump tax cuts,” Buttigieg said.

When the Joint Committee on Taxation scored the final version of the Trump tax law ahead of its passage, it estimated that the law’s corporate rate cut would reduce federal revenue by $1.35 trillion over 10 years.

Buttigieg's campaign said that the candidate is planning to release an international tax plan in the future to address concerns about corporations moving earnings overseas.

Buttigieg’s comments come after Sen. Bernie SandersBernie SandersTech firms face skepticism over California housing response Press: Another billionaire need not apply Ex-Massachusetts Gov. Deval Patrick mulling 2020 run: report MORE (I-Vt.) earlier this month called for raising the corporate tax rate to 35 percent as part of a broad corporate-accountability platform. 

In addition to the corporate-rate increase, Sanders is calling for eliminating many tax preferences for corporations, taxing U.S. companies’ domestic and foreign earnings at the same rate and taking other steps to prevent the use of offshore tax havens. He is proposing to use much of the revenue raised by his proposed corporate-tax changes to help fund his Green New Deal plan to combat climate change.

It’s notable that Buttigieg and Sanders have floated the same corporate tax rate because on many other issues, Buttigieg is running as a centrist to Sanders. The Vermont senator describes himself as a Democratic socialist and has offered a “Medicare for All” single-payer health plan that eliminates private insurance.

Besides Buttigieg and Sanders, former New York City Mayor Bill de BlasioBill de BlasioDe Blasio slams Bloomberg run for president: He 'epitomizes the status quo' The Hill's 12:30 Report: Washington braces for public impeachment hearings Trump NYC Veterans Day speech met with protests MORE (D) had proposed raising the corporate tax rate to 35 percent before he dropped out of the presidential race. De Blasio positioned himself as a progressive.

Several other moderate Democratic presidential candidates have proposed raising the corporate tax rate more modestly. For example, former Vice President Joe BidenJoe BidenFive landmark moments of testimony to Congress Democrats sharpen their message on impeachment Biden: 'I'm more of a Democrat from my shoe sole to my ears' than anyone else running MORE and former Texas Rep. Beto O’Rourke have floated increasing the corporate tax rate to 28 percent — the rate that former President Barack ObamaBarack Hussein ObamaSaagar Enjeti dismisses Warren, Klobuchar claims of sexism Pennsylvania's other election-night story Buttigieg praises Obama after Los Angeles Times corrects misquote MORE backed during his time in office.

Sen. Elizabeth WarrenElizabeth Ann WarrenBiden: 'I'm more of a Democrat from my shoe sole to my ears' than anyone else running Press: Another billionaire need not apply Saagar Enjeti dismisses Warren, Klobuchar claims of sexism MORE (D-Mass.) has said that she wants to reverse Trump’s tax cuts for corporations and has called for a 7-percent surtax on corporate profits above $100 million but hasn’t explicitly said what she thinks the corporate tax rate should be

Sen. Kamala HarrisKamala Devi HarrisPress: Another billionaire need not apply Saagar Enjeti dismisses Warren, Klobuchar claims of sexism New book questions Harris's record on big banks MORE (D-Calif.) has also talked about wanting to undo Trump’s tax cuts for the wealthy and corporations and has said that she wants to tax foreign and domestic income at the same rates but hasn’t provided many other details about how she wants to change the corporate tax system.

Many economists and policymakers across the ideological spectrum had thought that the U.S. corporate tax rate was too high when it was at 35 percent, because that rate was among the highest in the world.

“I think most economists would agree that raising the U.S. corporate tax rate back to 35 percent is not a good idea,” said Howard Gleckman, a senior fellow at the Urban-Brookings Tax Policy Center, which is led by a former Obama administration tax official. “When the U.S. rate is so far out of whack with the rest of the world, all you’re going to get is opportunities for avoidance and evasion.”

During his presidency, Obama proposed cutting the corporate tax rate to 28 percent while also curbing business tax breaks and establishing a minimum tax on U.S. companies’ foreign earnings. 

Conservative organizations and business groups have been warning against raising the corporate tax rate.

“Proposals to raise taxes carry harmful consequences for all Americans,” the RATE Coalition — a pro-corporate tax cut group of businesses that includes AT&T, Ford and The Home Depot — said in a statement.

“Tax hikes on American workers and job creators would crush our booming economy, increase unemployment, and reverse wage growth,” the coalition added. “A globally uncompetitive tax rate would move America backward.”

But some progressive economic policy experts think it would be reasonable to raise the corporate tax rate back to 35 percent.

In their new book, University of California, Berkeley economists Emmanuel Saez and Gabriel Zucman, who produced revenue estimates of Sanders and Warren’s proposed wealth taxes, float an effective U.S. corporate tax rate of 30 percent, which is equivalent to a 35 percent statutory federal rate plus state corporate taxes. They also float a 25 percent country-by-country minimum tax. They suggest that these changes could be part of a way to pay for universal health care and education.

Saez and Zucman argue in their book that globalization isn’t preventing countries from having high corporate tax rates, and that even if only some countries start coordinating with each other, they can better curb corporate tax avoidance.

Michael Linden, executive director of the progressive Groundwork Collaborative, said it makes sense to think about returning to a 35-percent corporate tax rate. He argued that there’s no evidence that the pre-Trump tax law rate was impacting job creation and wages, and also said that the rate cut under Trump’s law didn’t do anything except “pad the bottom line of the owners of these companies.”

While Democrats are divided on the extent to which the corporate tax rate should go up, it’s not surprising that the party's presidential candidates across the ideological spectrum are interested in raising the rate, given that they will need to raise revenue to offset the costs of their spending plans.

Proposals to raise the corporate tax rate are likely to be a political winner for Democrats. Trump’s tax law never became overwhelmingly popular, particularly because voters viewed it as disproportionately beneficial to corporations and high-income taxpayers.

“The public wants to raise taxes on corporations as much as they want to raise taxes on rich people,” said Frank Clemente, executive director of Americans for Tax Fairness Action Fund.