President Biden and other world leaders at the G20 Summit in Rome endorsed a global minimum tax on corporations, a move U.S. officials are hoping will help bolster the president's Build Back Better agenda.
G20 finance ministers in July had formerly agreed on a 15% minimum tax. The measure needed formal endorsement at the summit from the world’s economic powerhouses Saturday in Rome.
In a statement, Treasury Secretary Janet Yellen claimed the agreement made by the leaders on international tax rules, with a minimum global tax, "will end the damaging race to the bottom on corporate taxation."
Biden, who had originally called for a 21% minimum tax, celebrated the move in a tweet, writing that the leaders "made clear their support for a strong global minimum tax."
"Here at the G20, leaders representing 80% of the world’s GDP – allies and competitors alike – made clear their support for a strong global minimum tax," Biden's tweet stated. "This is more than just a tax deal – it’s diplomacy reshaping our global economy and delivering for our people."
The agreement aims to discourage multinationals from stashing profits in countries where they pay little or no taxes. These days, multinationals can earn big profits from trademarks and intellectual property. They can then assign earnings to a subsidiary in a tax haven country.
In the U.S., updating the tax law will require legislative approval by Congress – a feat that still faces an uphill trek to passage as the U.S. is home to 28% of the world’s 2,000 largest multinationals. The House and Senate will need to pass a bill raising the minimum tax on companies' overseas profits to 15% from the current rate of 10.5%.
Democrats are planning to include the increase as part of their party-line tax and spending bill that will likely be passed using a procedural tool known as reconciliation, allowing the party to bypass a 60-vote filibuster by Senate Republicans.
"Joe Biden’s drive to get the G20 leaders to create a cartel to keep business taxes high will be as popular with taxpayers in America as the similar success of OPEC nations to set a high price for oil was for American car owners," Grover Norquist, president of Americans for Tax Reform, told Fox News.
Fox Business' Megan Henney and the Associated Press contributed to this article.