At a time when our nation’s recovery is at stake, we should not allow the federal government to take drastic steps to permanently increase the size and reach of the U.S. government.
Wworld G-7 leaders recently announced their support for the Biden administration’s plan to implement a global minimum corporate tax of at least 15%. The plan would effectively eliminate tax competition and create a government tax cartel – companies would no longer be able to vote with their feet and move to more tax-efficient countries to grow their businesses. The Biden administration led the charge, and European leaders in high-tax countries with hugely inflated social spending adopted the proposal. Whenever European leaders encourage a US policy proposal, it’s generally safe to assume that it means bad news for ordinary Americans.
Treasury Secretary Janet Yellen and other world leaders have managed to get 130 countries on board – at least in principle. The application of the new global tax regime will be complicated, with an abundance of loopholes available to governments that would like to be more competitive in international markets.
Secretary Yellen has already lobbied on the global business minimum tax deal, saying there is a need to “end the race to the bottom” and “ensure that all citizens fairly share the government funding burden “. What is another term for a “race to the bottom”? It’s competition – the very principle that Democrats and Republicans agree is lacking in big tech and other industries. For a (political) reason, when the Biden administration has to compete, all of that talk about the benefits of vigorous competition for American consumers and workers is dropped.
The term ârace to the bottomâ is a not-so-smart (no pun intended, 2021) mask for Yellen’s real goal: to end tax competition. Putting a floor on the cost of government is like putting a floor on the cost of any other product. It’s bad for consumers. And in this case, it’s bad for businesses and workers.
As Grover Norquist, president of Americans for Tax Reform, wrote in a letter to US policymakers: âCartels that keep prices high hurt consumers. Creating a government tax OPEC to avoid tax competition is bad for citizens and taxpayers. Competition drives out selfish annuity seekers in business and government.
And that is exactly what the leaders of the G-7 agreed to. A global cartel to raise taxes. OPEC for politicians.
If this comprehensive minimum tax agreement is allowed to go into effect, it will cede U.S. financial sovereignty to unelected Paris bureaucrats working for the Organization for Economic Co-operation and Development (OECD) and their conspicuous counterparts. similar to Brussels with the European Union. They all share the desire to tie the world to higher taxes and bigger government.
How did the United States end up in this position in the first place?
President Donald Trump has withstood decades of pressure from the OECD and the European Union to introduce a global minimum tax through the OECD’s Pillar 2 proposal, which aims to get rid of what they love call it “tax havens”. The European Union especially does not like competition from Member States like Ireland, Hungary or Luxembourg, all countries which dare to tax “too little” and therefore attract businesses and investment. President Trump has also fought the changes the OECD has called for in its Pillar 1 proposal, which attempts to rewrite the international tax system to provide countries with a greater share of tax revenues from U.S. multinationals. Both proposals are particularly damaging to U.S. interests – they attack U.S. businesses and the U.S. tax base, remove the long-accepted standard of physical presence, and would undoubtedly hurt U.S. jobs and U.S. innovation.
The Biden administration has two main reasons for its shift in focus: First, the president sees this plan as a way to raise taxes and fund his spending spree without losing tax revenue to international competition – the Cartelists 101 playbook. Second, Biden is currently making great play on the idea that a multilateral America is ‘back’, and it is, he says, a painless way to reinforce that message, even if the price comes at the expense of consumers. Americans.
President Biden has proposed 30 tax increases on American families and businesses totaling $ 2,975 billion ($ 2,975,000,000,000!) Over the next ten years. This includes increasing the corporate tax rate from 21% to 28%. After factoring in state corporate tax, the United States will be at an average rate of 32%, which is significantly higher than China’s 25% corporate tax rate (in practice, it can often be lower) or even the average corporate tax rate in China. of many European countries, which is only 23 percent.
On top of that, Biden’s tax increases would also impose global minimum tax on US companies operating abroad, and his plan would repeal tax deductions that encourage intellectual property to return to the United States.
The Biden administration can hope that a global tax cartel will mitigate the economic damage caused by its tax increases: it also assumes that foreign countries will in fact follow the rules. Perhaps this is too far an assumption.
Are they really going to follow the rules in a way that ensures American workers and businesses are treated fairly? And why should we now trust the European governments and institutions that have extorted large tax revenues from American businesses through digital service taxes and fines for so-called antitrust violations?
Meanwhile, countries like China and Russia should find ways to avoid the comprehensive minimum tax deal, if not ignore it altogether. In fact, the Chinese state-controlled media is already urging the Communist Party to push for massive exemptions or simply ignore the deal. In fact, the Chinese see this global deal as an opportunity to cut taxes while everyone else raises them, attracting more investment, boosting domestic manufacturing, and becoming even more competitive globally than ever before.
This proposal is a gift for the Beijing regime and its âNew Silk Roadâ agenda. This would dangerously restrict the United States as we enter a new era of global competition with China, paving the way for Chinese companies to replace American success stories in technology and other critical industries.
China’s efforts to become the world’s technology leader are at an inflection point. In March 2021, China adopted a 200% tax deduction for qualifying research and development expenses. And China already offers a preferential tax rate of 15% for high-tech companies.
Instead of agreeing with foreign governments to keep taxes high, President Biden should ensure that the U.S. tax code becomes even more competitive globally than it is now. And it should aggressively fight efforts by foreign countries to adopt discriminatory taxes and trade barriers such as taxes on digital services and unfair government subsidies.
The United States was named the most competitive economy in the world after Republicans passed the 2017 tax cuts. What happened next? The US economy grew faster than the rest of the world, and it was the only The G-7 country will record annual real GDP growth of over 2% in 2018. The US economy’s growth rate of 2.9% in 2018 has overtaken countries like Germany, which has seen growth. by 1.5%, and the United Kingdom, which grew by only 1.3%. President Biden should continue on this path of success.
The Biden administration’s plan to eliminate tax competition and agree to a global minimum tax is dangerous for America. At a time when our nation’s recovery is at stake, we should not allow the federal government to take drastic steps to permanently increase the size and reach of the U.S. government, let alone countries around the world that would consider the minimum of 15% tax as a valuable accessory for their own inflated governments. Instead, we should pursue a tax policy that promotes competition and innovation and preserves America’s legacy as the world’s economic leader.