Amazon vans line up at a distribution center to pick up packages for delivery on Amazon Prime Day in Orlando, Florida.
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Amazon, Qualcomm and Micron were among stocks that fell Thursday after a report said the Biden administration is pushing for a tax change that would require companies to pay a minimum tax rate of 15%.
The Washington Post reported the White House is targeting this levy and is willing to temporarily set aside its broader proposal to hike the corporate tax rate to 28%. This is in an effort to win Republican support for the administration’s infrastructure package.
Strategists said the proposed 15% minimum tax is not a new idea and was already sought by the administration. Republicans have opposed the Biden plan to increase the corporate tax rate from its current level of 21%, which was approved by the GOP in 2017. The report said that President Joe Biden still wants to raise the corporate tax rate, but that may be now discussed outside of the infrastructure negotiations.
The minimum levy is viewed as a so-called Amazon tax, as it’s aimed at ensnaring profitable companies that pay low corporate tax rates.
“So much of this debate is fluid,” Raymond James Washington policy analyst Ed Mills said. “This year, there’s a dramatic swing toward focus on a minimum tax for those that pay less than the statutory rate.”
“Where this fits into the larger model of what Democrats are pushing for is it’s part of an idea that Democrats aren’t raising taxes; they’re making more individuals and corporations pay the taxes they already owe,” he added.
Bleakley Advisory Group chief investment officer Peter Boockvar said it appeared that Amazon and the chip stocks fell soon after the report was released. “Netflix is another one. It’s also down,” he said. “A lot of it is tech.”
Boockvar said Micron paid a 7.5 % tax rate last quarter. Qualcomm paid a tax rate of 17% but it paid at a 5.7% rate in the prior quarter, he noted. Nvidia paid a tax rate of 6.5% in the last quarter and less in prior quarters, Boockvar said. However, the stock rose after Evercore called it a top pick Thursday.
The U.S. has also been calling for a 15% tax rate on an international basis. The Treasury Department said Wednesday that finance ministers from the Group of Seven nations are expected to endorse the U.S. push for a 15% minimum corporate tax rate when it meets later this week.
The U.S. is seeking the minimum tax to try to end a downward spiral of corporate tax rates and stop multinational companies from shifting profits to tax-haven countries.
“This is a proposal that Joe Biden has repeatedly pushed,” Strategas head of policy research Dan Clifton said. “What he’s saying to the Republicans is ‘if you do a bi-partisan deal, I’ll only raise one tax.’ It does not mean Biden is not going to raise the corporate tax rate down the road.”
Clifton and Mills expect Republicans to reject the proposal. “What it’s doing now is setting up the final action from Biden for walking away from a bipartisan agreement,” Clifton said.
The minimum tax proposal would provide the Treasury with about $140 billion over 10 years, while the broader 28% tax rate would rake in $700 billion, Clifton said.