Originally published at Canadian Dimension.

In Janet Yellen’s confirmation speech to United States Senators in January 2021, she said the government must “act big” to deal with the pandemic’s economic fallout.

Three months into her role as the first woman treasury secretary, Yellen is going beyond big spending with an ambitious plan to rollback decades of corporate tax cutting.

Canada’s Liberal government must grab the same opportunity to go as big, if not bigger.

Just like Yellen, Finance Minister Chrystia Freeland is the first woman to hold the federal government’s most important fiscal position.

With her first budget since taking on the job mid-pandemic, Freeland has an opportunity to be remembered as a pathbreaking finance minister. She can take plenty of inspiration from Yellen’s “Made in America Tax Plan.”

Yellen’s call for a 21 percent global minimum corporate tax, and an increase to the US federal corporate tax rate back to 28 percent attracted the most attention. Canada should support these measures as part of ending the decades-long race to the bottom on corporate taxes. A recent study showed Canada would gain at least $11 billion by supporting the global minimum.

However, Yellen’s plan calls for much more. Let us consider three components that the Canadian government could emulate.

First, the federal government needs to close the gap between profits reported to shareholders and profits reported to tax authorities. The US government plans to impose a 15 percent tax on the excess between ‘book income’ and ‘taxable income.’

In 2019, at least 25 Canadian corporations with book income greater than $100 million paid no net income tax. With a 15 percent minimum book income tax, those companies would have paid a combined $5.1 billion. Instead, they claimed almost $4 billion in net tax deductions.

More than $1.5 billion of that tax benefit went to media conglomerate Thomson-Reuters, which says it was able to reduce its tax bill through “reorganization of certain foreign affiliate operations.”

A minimum tax on book income reduces the incentive for fancy accounting to reduce taxable income, including through international profit shifting.

Second, Canada should shift tax subsidies from fossil fuels to clean energy production. The Biden administration’s plan includes a range of supports to guide the US transition toward a carbon-neutral economy. At the same time, it will remove existing subsidies for fossil fuel companies, and increase ‘polluter pays’ tax penalties.

Despite decades of federal and provincial support for fossil fuel companies, the industry is waning. Since the industry’s peak in 2014, employment had fallen almost 20 percent before the pandemic. Over that same time frame, fossil fuel companies claimed $12.4 billion in various tax reductions, including more than $800 million worth of investment tax credits.

The pandemic has wreaked havoc on employment. The federal government should use this opportunity to aggressively reshape the country’s energy industry.

Yellen’s Treasury Department recognizes that support for clean energy production will attract investment. More investment can create higher-paying jobs to replace those being lost in oil and gas.

Third, the Trudeau government should invest in more tax enforcement. Since 2015, the federal government has increased funding for the Canada Revenue Agency. Yet, the CRA’s spending on international and large business compliance was actually reduced from 2015/16 to 2018/19. Planned spending for all reporting compliance in 2021 remains more than 10 percent below its 2008 level.

The Parliamentary Budget Office estimated that each additional dollar spent on business tax compliance returns about five dollars in fiscal benefit. More robust enforcement would both discourage law-bending tax schemes and hold corporations accountable when they do underpay.

Decades of corporate tax cutting failed to produce the benefits promised by proponents. Instead, it has contributed to worsening wealth inequality, which is implicated in myriad social harms.

The IMF recently said governments need to use every measure at their disposal to recover from the pandemic in a way that reduces inequality. Combine that with the findings of a PBO report on tax avoidance that concluded “it may be time for a ‘fundamental rethink’ on international corporate taxation.”

The finance minister, as author of a book called Plutocrats, knows that inequality is the product of political choices as much as economic forces.

The Biden administration is offering an unprecedented opportunity for Freeland to join an international effort and make bold political choices. The ball is in Canada’s court.

D.T. Cochrane is an economist and policy researcher with Canadians for Tax Fairness. D.T. has lived in Ontario for more than 20 years, but still considers himself a Saskatchewanian at heart.