For the past couple of decades, I’ve been warning (over and over and over and over again) that politicians want to curtail tax competition so that it will be easier for them to increase tax burdens.
They’ve even been using an international bureaucracy – the Paris-based Organization for Economic Cooperation and Development – in an effort to create a global high-tax cartel. Sort of an “OPEC for politicians.”
All of which would lead to “goldfish government.” Though “predatory government” also would be an accurate term.
The Obama Administration did not have a good track record on this issue, and neither did the Trump Administration.
Now the Biden Administration wants to be even worse. Especially if Treasury Secretary Janet Yellen continues to play a major role.
Here are some excerpts from a story in today’s Washington Post by Jeff Stein.
Treasury Secretary Janet Yellen is working with her counterparts worldwide to forge an agreement on a global minimum tax on multinational corporations, as the White House looks for revenue… A key source of new revenue probably will be corporate taxes… Biden has said he would aim to raise potentially hundreds of billions more in revenue from big businesses. …tax experts…say raising the rate could damage U.S. competitiveness. …Yellen is working…through an effort at the Organization for Economic Cooperation and Development in which more than 140 countries are participating. The goal is for countries to agree in principle to a minimum corporate tax rate… “A global minimum tax could stop the destructive global race to the bottom…,” Yellen told U.S. senators during her confirmation process. …The impact of the falling international tax rate has hit the United States as well, constraining lawmakers’ ambitions to approve new domestic programs.
Needless to say, any type of tax harmonization is a bad idea, and it is an especially bad idea to impose a minimum rate on a tax that does so much economic damage.
Here are four points that deserve attention.
- Higher corporate tax burdens will be bad news for workers, consumers, and investors.
- Regarding the so-called race to the bottom, even the IMF and OECD have admitted that lower corporate tax rates have not led to lower corporate tax revenue.
- Once politicians impose a global agreement for a minimum corporate tax rate, they will then start increasing the rate.
- Politicians also will then seek agreements for minimum tax rates on personal income, capital gains, and dividends.
I also want to cite one more passage from the article because it shows why the business community will probably lose this battle.
The U.S. Chamber of Commerce says it supports a “multilateral” approach to the problem but is “extremely concerned”.
I don’t mean to be impolite, but the lobbyists at the Chamber of Commerce must be morons to support the OECD’s multilateral approach. It was obvious from the beginning that the goal was to grab more revenue from companies.
I’m tempted to say the companies that belong to the Chamber of Commerce deserve to pay higher taxes, but the rest of us would suffer collateral damage. Instead, maybe we can come up with a special personal tax on business lobbyists and the CEOs that hire them?
Let’s wrap this up. The Wall Street Journal opined on the issue this morning.
As you might expect, the editors have a jaundiced view.
Handing out money is always popular, especially when there appear to be no costs. Enjoy the moment because the costs will soon arrive in the form of tax increases. Treasury Secretary Janet Yellen put that looming prospect on the table… The Treasury Secretary is also floating a global minimum tax on corporations, which would reduce the tax competition among countries that is a rare discipline on political tax appetites.
Amen. The WSJ understands that tax competition is a vital and necessary constraint on the greed of politicians.
P.S. Even OECD economists have acknowledged that tax competition helps to curtail excessive government.
P.P.S. Though an occasional bit of good research does not change the fact that the OECD is a counterproductive international bureaucracy that advocates for statist policy.
P.P.P.S. To add insult to injury, American taxpayers finance the biggest portion of the OECD’s budget.
P.P.P.P.S. To add insult upon insult, OECD bureaucrats get tax-free salaries while pushing for higher taxes on everyone else.
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Image credit: OECD Organisation for Economic Co-operation and Development | CC BY-NC-ND 2.0.
