“The result will likely be a deeper and longer-lasting crisis, with mounting problems of indebtedness, more entrenched poverty, and growing inequality,” Ms. Yellen said, estimating that as many as 150 million people could be pushed into extreme poverty this year. “This would be a profound economic tragedy for those countries, one we should care about.”
At issue is how governments should tax income that multinational companies earn across borders. Large firms increasingly operate in multiple nations: Amazon sells to shoppers in Europe, for example, and Morgan Stanley offers financial services in China.
With operations spread across multiple countries, many companies seek to reduce their tax bills by locating operations — or simply booking profits — in low-tax jurisdictions like Bermuda or Ireland. When Republicans passed their sweeping tax law in 2017, supporters said it would help to curb that practice and encourage domestic investment, both by reducing the corporate tax rate in the United States and by setting up a new system for taxing income earned abroad, including a measure that was meant to be like a minimum tax for all global income.
But Democrats say the law and the administration’s use of the tax did the opposite, giving companies new incentives to locate factories and profits abroad. Both the plan Mr. Biden sketched out last week and a new proposal released by three Democratic senators on Monday would seek to reverse those incentives, taxing offshore income more aggressively and offering new targeted benefits for companies that invest in research and production at home.
The proposal would increase the rate of the 2017 minimum tax and change how it is applied to income that corporations earn in various countries overseas, effectively forcing many companies to pay the tax on more of their income, while offering new targeted tax relief linked to domestic investments.
The Senate plan comes from Senator Ron Wyden, Democrat of Oregon, who is in charge of writing tax legislation as chairman of the Finance Committee, and two Democratic colleagues: Senator Sherrod Brown of Ohio and Senator Mark Warner of Virginia.
The presence of Mr. Brown, one of the most progressive Democrats on tax issues in the Senate, and the more centrist Mr. Warner as authors suggests the Wyden plan could attract widespread support in a Democratic caucus that most likely cannot afford to lose a single vote for Mr. Biden’s infrastructure plan.