More than a hundred days. It has been just over two months sinceJoe Biden enters the White House to design a new economic policy, in stark contrast to that of Donald Trump in the belief, to use the words of Janet Yellen, that "in the last four years we have seen live that what happens when America withdraws from the world stage. America First cannot be America alone”. And so, speaking in Chicago, Yellen, the strong soul of the administration, shot a third arrow at his bow: "We intend to work with the G20 countries to identify a minimum level of corporate taxation that can put an end to the race to the bottom against states".
Thus the circle closes. Biden first approved a robust short-term package: 1.900 billion, equal to 8% of GDP, which translated into a strong stimulus to consumption for families, gratified by the distribution of 1.400 dollars per citizen. The second move was the approval of package, amounting to 2.300 billion dollars, which over the next eight years will leverage the investments in infrastructure necessary to support the challenge with China and the mega commitment to education and welfare. Now, in the third stage, the answer to the crucial question is outlined: who will pay for this effort which is reminiscent in size of Franklin Delano Roosevelt's New Deal?
In a first phase it will be inevitable an increase in debt accompanied by an increase in the cost of money. But this doesn't worry because the greatest demand for dollars will take place in the face of an economic recovery that promises to be very robust.
In parallel, as well as the cancellation of some tax relief, will come increased the corporate tax from 21 to 28% (however less than 35% of the Obama era) thus reversing Donald Trump's provisions. They will also increase income tax, but only for those with a taxable income exceeding 400 dollars.
Last but not least, the battle to get everyone to pay taxes, including companies that today can count on tax avoidance tools thanks to tax havens. "It is a question - the Treasury minister said - of making sure that governments have stable tax systems that have sufficient means to invest in essential services and thus respond adequately to crises". Hence the goal of an international alliance of states to prevent Gafa (Google, Amazon, Facebook and Apple) and the other giants from hiding profits from the tax authorities in compliant countries. Yellen continues: "The president calls for a renewed international commitment which recognizes the need for a common effort to put an end to the erosion of tax revenues".
The picture is still moving. In reality, Biden started head-on against US multinationals. “In 2019 – he said – 91 Fortune 500 companies, the most important in the world including Amazon, used every possible expedient to not pay one cent of income tax. I don't want to be punitive, but this is not the case: a firefighter or a teacher pays 22%, why Amazon not even a dollar?”. Hence the intention proclaimed by the president to impose a tax rate of 21% on all turnover, in the US and outside, giants.
But here another question arises: if Amazon or Google have to pay 21% of the profits made in Italy (for example) in the USA, what space will the Revenue Agency have? Will the partners have to settle for crumbs?
This will have to be discussed starting from G20 in Rome which, moreover, will have to develop the final attack plan against the pandemic which remains the main emergency. But the US is presenting itself at the appointment with a much higher bargaining power than in the recent past. As emerges from the IMF's Outlook, the US economy promises to be back as early as 2021 the locomotive of world growth compared to China (6,5% against 6%). The various interventions of the presidents (Trump as well as Biden have increased the purchasing power of US families by 1.700 billion dollars which will largely fuel purchases abroad with an impact between 0,5 and 1% of GDP for the countries European and Asian ones, a benefit that Washington will enforce in the tax negotiations within the OECD.
Finally, for now Wall Street has responded well to the president's activism. The threat of an increase in taxation which, according to Goldman Sachs, is worth almost a tenth of the average earnings per share of the five hundred most important Wall Street companies, did not prevent the S&P500 index yesterday from closing for the second consecutive session at levels never seen before. seen in history. Taxes are not scary for the enormous amount of resources allocated by the Biden administration starting with the relaunch of infrastructure. The money shouldn't be long in coming because Democrats have free field in Congress and they can afford what they want in the legislative process: yesterday's news that the next measures will also be managed in the most expeditious way, the one that grants limited space to minorities.
And so Biden can accelerate in the race to middle-class consensus, to be welded together with that of minorities, to recreate the centrality of the democratic party overthrown by Ronald Reagan 40 years ago. The game works. At the moment. Then, when it comes to paying taxes, we'll see.
