Taken together, Mr. Biden’s plans would raise about $3.8 trillion over 10 years, with 72 percent of that coming from the top 1 percent of earners, according to an analysis by the Tax Foundation. Contrary to much Republican rhetoric, Mr. Biden’s proposals represent not confiscatory socialism but an effort to undo the least defensible giveaways in the 2017 tax cuts passed by a GOP Congress and signed by President Trump, while preserving parts of that law that broadened the tax base.
Last Wednesday, Mr. Biden added additional teeth — and complexity — to his corporate tax plans, targeting the perennial issue of “offshoring” of U.S. jobs by multinationals. During a campaign stop in Michigan, he specified that his proposed minimum tax on the foreign profits of U.S.-based companies would eliminate an automatic exclusion worth 10 percent of assets, and apply on a country-by-country basis, in effect making firms pay more to the United States on what they earn in low-tax countries such as Ireland. In addition, he would apply a top corporate rate of 30.8 percent on earnings from products U.S. companies make abroad and sell in the United States — coupled with a 10 percent tax credit for investments that reopen closed plants or “reshore” jobs from abroad.
The political benefits for Mr. Biden of this message, delivered in the Midwest, are clear enough. The benefits for the economy are more mixed, as is often the case with policies that seek to direct capital from one potential investment to another. It makes sense to reduce artificial tax advantages in the 2017 tax bill for operating, or parking intellectual property, in tax havens abroad. Mr. Biden’s proposed surtax on foreign manufacturing, however, seems to deny the reality of global supply chains. Americans certainly wouldn’t like it if, say, Germany penalized BMW for exporting cars from South Carolina. The surtax applies to U.S.-owned call centers or services overseas “where jobs could have been located in the United States.” Meeting that amorphous standard will surely create jobs for lawyers and accountants. So will qualifying for the job-retention tax credit; to the extent companies succeed, the proposal narrows the corporate tax base Mr. Biden elsewhere seeks to broaden.
Mr. Biden is right to present alternatives to Mr. Trump’s economic bromides. He is also right to advocate maximum job creation in the United States. The best way to achieve the latter goal, though, is to ensure the United States is a desirable place to invest — generally. Higher business taxes can be compatible with that goal, as long as the rules are clear and consistent.