- The Washington Times
Tuesday, May 18, 2021

Treasury Secretary Janet Yellen on Tuesday pitched President Biden’s push to increase corporate taxes to an unlikely audience: the U.S. Chamber of Commerce.

It didn’t go over well.

Ms. Yellen’s call to “fundamentally reform” the corporate tax system to pay for infrastructure spending was book ended by comments from Chamber President and CEO Suzanne Clark pushing back against higher tax rates.

“We are confident that the investments and tax proposals in the jobs plan, taken as a package, will enhance the net profitability of our corporations and improve their global competitiveness,” Ms. Yellen said in remarks aired Tuesday as part of the Chamber’s Global Forum on Economic Recovery. “We hope business leaders will see it this way and support the jobs plan.”

Ms. Yellen said that with corporate tax rates at a historic low, companies can afford their “fair share” of taxes.

Mr. Biden wants to increase the U.S. corporate tax rate from 21% to 28%, among other changes, reversing the cut from 35% in the 2017 GOP tax law. The tax increases are intended to fund part of the president’s more than $2.25 trillion infrastructure plan.

The Chamber of Commerce and other major business lobbying groups say they support boosting infrastructure spending but that lifting the corporate tax rate would stifle growth at a precarious time for the economy.

Ms. Clark said before Ms. Yellen’s remarks that the wrong government policies can stifle any potential economic recovery.

“That’s why the Chamber is fighting back against proposals such as raising corporate tax rates to the highest in the developed world, which would disincentivize … investment,” she said.

She said afterward that it’s always an honor to hear from the treasury secretary, including on areas of disagreement.

“The data and the evidence are clear: the proposed tax increases would greatly disadvantage U.S. businesses and harm American workers and now is certainly not the time to erect new barriers to economic recovery,” Ms. Clark said.

The comments indicate that Mr. Biden will have a difficult time getting major corporate buy-in on his $4 trillion-plus economic agenda if he presses to pay for the new spending with higher taxes.

Other major business groups, such as the Business Roundtable and the National Association of Manufacturers, have raised similar concerns about the damage that increasing taxes would have on the economy right now.

The president and Ms. Yellen also are encountering legal hurdles in their bid to control tax policy at the state level through strings in the $1.9 trillion coronavirus relief package.

In a little-noticed ruling, a federal judge found that Ohio has a “substantial likelihood of success” in its lawsuit fighting the administration’s restriction on states using their federal aid to offset future tax cuts.

U.S. District Judge Douglas Cole last week cited a 2006 Supreme Court precedent on state sovereignty that says states cannot accept conditions set by Congress that they are “unable to ascertain.”

Ohio is set to receive $5.5 billion from the relief measure that President Biden signed into law in February. But the state sued over the law’s provision that states can’t use the money to offset tax cuts, saying the provision violates Congress’ authority under the Constitution’s Spending Clause.

The provision says states can’t use the federal aid to “directly or indirectly offset a reduction” in net tax revenue.

“The court honestly has no idea what an ‘indirect offset’ to net tax revenues may be,” Judge Cole wrote. “It became clear at oral argument that the federal government was largely unwilling to hazard a guess as to what it meant either.”

At least 16 other states have sued the administration to block the restriction on their finances. Ohio’s lawsuit has received the backing of 74 House Republican lawmakers, including Rep. Kevin Brady of Texas, who has introduced legislation to rescind the provision.

The judge in the Ohio case declined to issue a preliminary injunction against the Treasury Department taking action against the state, saying the merits of the case will likely be decided before that could happen.

But Judge Cole did say it is “not at all clear that [Ms. Yellen] can ever cure a Spending Clause ambiguity program, even through final regulations.”

• Dave Boyer can be reached at dboyer@washingtontimes.com.

• David Sherfinski can be reached at dsherfinski@washingtontimes.com.

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