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Commerce Secretary on corporate tax rate: ‘Many CEOs felt that 21% was too low’

·Senior Producer and Writer
·4-min read

As the Biden administration pitches its $2 trillion infrastructure proposal and the corporate tax hike that would fund it, Commerce Secretary Gina Raimondo has become the team’s unofficial CEO whisperer.

Raimondo, a former Rhode Island governor who previously worked in venture capital, says she’s talked to “dozens and dozens of CEOs” about the proposal to raise the corporate tax rate from 21% to 28%.

She says when all is said and done, corporate America might not be as universally opposed to a hike as it might seem after Congress lowered the tax rate from 35% to 21% back in 2017.

“Many, many, many CEOs felt that 21% was too low, lower than they expected,” she told Yahoo Finance's editor-in-chief, Andy Serwer, on Thursday.

The Commerce Secretary added that many of the CEOs wouldn’t oppose an increase under one condition: “If the money were to be used for investments that improve our competitiveness, like in broadband, in research and development, in roads, bridges, water, airports."

WASHINGTON, DC - MAY 07: (L-R) U.S. Energy Secretary Jennifer Granholm, Commerce Secretary Gina Raimondo, and Transportation Secretary Pete Buttigieg speak to members of the press outside the West Wing of the White House after a meeting with President Joe Biden and Vice President Kamala Harris on May 7, 2021 in Washington, DC. President Biden and Vice President Harris met with the “Jobs Cabinet” to discuss the American Jobs Plan. (Photo by Alex Wong/Getty Images)
Commerce Secretary Gina Raimondo, along with Energy Secretary Jennifer Granholm and Transportation Secretary Pete Buttigieg spoke to members of the press outside the West Wing of the White House on May 7. (Alex Wong/Getty Images)

While plenty of business groups like the U.S. Chamber of Commerce and Business Roundtable have offered opposition to the plans for a corporate tax increase to 28%, some business leaders have supported an increase above the current level of 21%.

During Yahoo Finance’s All Markets Summit in October, former Goldman Sachs president and COO Gary Cohn said he’d be comfortable with the corporate tax rate moving back up no higher than 28%. When he served as former President's Donald Trump's chief economic adviser, Cohn was central in crafting the Tax Cuts and Jobs Act of 2017 that lowered the corporate tax rate all the way down to 21%.

Still, Cohn said, “21% to me was the lower end of where we needed to be.”

WASHINGTON, CA - MAY 18: Secretary of Commerce Gina Raimondo and Secretary of Transportation Pete Buttigieg leave the Russell Senate Office Building after meeting with Senate Republicans in an office of Sen. Shelley Moore Capito (R-WV) on Capitol Hill on May 18, 2021 in Washington, DC. (Kent Nishimura / Los Angeles Times via Getty Images)
Secretary Raimondo and Secretary Buttigieg after meeting with Senate Republicans to discuss infrastructure this week. (Kent Nishimura / Los Angeles Times via Getty Images)

Another architect of the 2017 tax cuts, House Ways and Means Committee Ranking member Kevin Brady, says rates should stay where they are, though. "I think it's a major economic blunder to raise taxes on job creators as we're urging them to hire more Americans," he told Yahoo Finance this week.

For her part, Raimondo acknowledged that business leaders might not "love" the 28% proposal but said she believed a middle ground was possible. While Raimondo declined to specify where that middle ground might lie, Sen. Joe Manchin, a Democrat from West Virginia who's a must-have vote for the proposal to pass, has said that he favors a 25% rate.

'She likes talking to businesses'

Raimondo has long had a reputation as a one of the most business-friendly Democrats. In January, in the middle of her confirmation hearings, Ravi Kumar, president of Infosys (INFY), a global business consulting and IT company with a hub in Rhode Island, sang her praises in interview with Yahoo Finance.

“Gov. Raimondo is one of my favorite public policy leaders I have interacted with in the United States,” Kumar said. “She comes with a business background, and then she likes talking to businesses.”

To be sure, Raimondo isn't the Biden administration's only ambassador to the business community. This week, Treasury Secretary Janet Yellen, who's also highly regarded by business leaders, asked U.S. Chamber of Commerce to support the infrastructure plan. 

"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,” she said.

Still, the Biden administration may have to work to convince businesses that they'll benefit from the infrastructure plan despite the included tax cut. A recent Business Roundtable survey found that 98% of its CEOs members feel increasing the corporate tax rate all the way to 28% would have “moderately” to “very” significant adverse effects for their company.

The Commerce Secretary remains in the middle of negotiations this week trying to find compromise with Republican Senators on the infrastructure plan. The GOP group has said nothing is off the table at this point when it comes to paying for the bill but would prefer options other than a corporate tax hike.

“I think there is a place for compromise,” Raimondo said, noting that she plans to work on the issue through the weekend. “There’s good faith on both sides and we're trying our best.”

Ben Werschkul is a writer and producer for Yahoo Finance in Washington, DC.

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