Tax often is used as a policy lever, and companies should expect to continue to see that lever used to help address economic and societal issues. In response to the pandemic, there has been a flood of stimulus measures and government support — and much of that aid has been tied to tax relief. To date, the US Congress has enacted five pandemic-related packages costing $3.9t. The Biden administration has proposed an additional $1.9t of spending in its “American Rescue Plan,” which includes additional stimulus measures, including tax measures such as an increased and expanded Earned Income Tax Credit and increased and expanded credits concerning children and childcare.
Beyond stimulus, the Biden administration’s policy agenda includes tax increases to pay for policy priorities. These priorities include climate change, health care, education, housing and infrastructure investment. Long-standing Democratic goals of making the wealthy and corporations pay their “fair share” are reflected in proposals to increase the top individual income tax, estate tax and corporate income tax rates, as well as impose a “minimum corporate tax” and increase US taxation of offshore corporate income. To help address income inequality, President Biden proposes extending, reviving or creating numerous tax incentives, including credits for first-time homebuyers and renters and for the care of children and the elderly.
President Biden has also proposed incentives to encourage US manufacturing through a 10% “Made in America” Tax Credit for investment in revitalizing factories and reshoring jobs. He has paired this with a 2.8% “offshoring” surtax on a US company’s overseas production profits from sales back to the US.
Companies need to evaluate these proposals and determine how their overall strategy and operations may be affected and which options they can put their support behind.
Counting on corporate leadership
The Biden administration has moved quickly to implement actions centering on these five dynamics. But the legislative outlook remains uncertain. Regardless of what happens in Washington, DC, emerging market trends around elevating people, financial inclusion, sustainability and more are creating a strategic imperative for businesses to act now. As you consider how to move your organizations forward through the evolving recovery landscape, a new level of organizational transparency will be required to better connect with your employees, customers and the communities you serve. Finding ways to unlock your data’s power for improved insights and accelerate action will be vital in moving through the recovery. Putting humans squarely at the center of transformation will help address many of the inequities propelled by the pandemic.