The Biden administration has put forth a new rule that would mandate the largest U.S. companies to pay a minimum of 15% of their profits in taxes. This proposal, included in the 2022 Inflation Reduction Act, is expected to affect about 100 of the most significant corporations, those with annual profits of at least $1 billion. Advocates of the tax, including Democratic lawmakers such as Elizabeth Warren, have pushed for its implementation to ensure these big companies contribute their fair share.
Similar to the alternative minimum tax applicable to predominantly wealthier individuals, the corporate Alternative Minimum Tax (AMT) is designed to prevent large corporations from exploiting tax loopholes and exemptions to minimize or entirely avoid paying taxes on substantial profits. The Treasury Department views this tax as a crucial component of its objective to hold the largest corporations and wealthiest individuals accountable for their tax obligations.
The Treasury estimates that over the next decade, the AMT would generate $250 billion in tax revenue. Without such a measure, it is projected that the top 100 companies would only be paying 2.6% of their profits in taxes, with 25 of them potentially avoiding tax liabilities altogether. Former President Donald Trump, who previously lowered the corporate tax rate to 21% from 35% during his administration in 2017, has expressed intentions to abolish the corporate AMT if re-elected, advocating for a further reduction of the corporate tax rate to 15%.
An analysis cited by Senator Warren and other lawmakers revealed that following the corporate tax cut under the Trump administration, 55 major corporations reported profits totaling $670 billion but paid less than 5% in taxes over a five-year period. The proposed rule by the Treasury Department is open for public comment until December 12, with a scheduled hearing on the rule slated for January 16.
