Tax collectors are coming after you as never before. This is bad news for a sustainable global economic recovery from the pandemic.
U.S. Treasury Secretary Janet Yellen is proposing that countries around the world enact a global minimum corporate tax rate—and this idea is just for starters. Plans are being developed to have global tax laws for individuals as well. No matter where you live or have a business, politicians want more money from you.
Yellen says a global minimum corporate rate is needed because there is, as she puts it, a destructive race to the bottom. To hear her tell it, governments won’t be able to get any taxes at all unless drastic steps are taken.
Our Treasury chief is spouting nonsense. Countries have been tweaking corporate tax rates for years to stimulate growth, but they are nowhere near zero. Ireland’s famously low rate is 12.5%. Hungary’s 9% is the lowest in Europe. Britain, moreover, has announced it plans to substantially boost its corporate tax rate in 2023.
Nonetheless, Yellen and other big tax-and-spend advocates are employing scare tactics so they can more easily hike taxes to help pay for their blowout spending schemes.
Yellen’s call has a special urgency to it: If she and President Biden have their way, the U.S. will soon have the highest corporate tax rate in the developed world. This will give a huge advantage to companies overseas that compete with ours.
A global tax regime with a high minimum would help take the sting out of what congressional Democrats want to do here.
Of course, what these advocates can’t grasp is what experience has taught time and again: Low-tax systems mean more prosperous economies, which mean more government revenues.
Nonetheless, the G20—the international forum of the world’s major economies—has been formulating plans for a global minimum tax. It’s no surprise that the biggest European proponents are high-tax Germany and France.
High-tax advocates in the U.S. snuck a provision into Biden’s pandemic stimulus bill that bans states from cutting taxes. New York and California are furious that millions of residents are moving to more tax-friendly environs such as Florida and Texas.
It’s no wonder people are pulling up stakes in these financially reckless states. New York, with the worst state taxes in the country, has a budget of $212 billion. Florida’s budget is $97 billion—less than half of New York’s—even though Florida has 2 million more people.
Taxpayers had better hope these tax schemes are thwarted. Otherwise, our economy—and those of the rest of the world—will be unnecessarily hurt, and the timing couldn’t be worse.
Fortunately, opposition is starting to grow, led by—no surprise—Ireland and Hungary. Yellen had been hoping to get a 21% corporate minimum tax, but some other nations want 15%.
Any minimum, of course, is bad because it sets a base for further hikes from ever-greedy politicians.
In the U.S., a number of states are challenging the constitutionality of that new “states can’t cut taxes” provision in the courts.