The Biden administration is taking the first step toward a global economy by spearheading a global minimum corporate tax. This was a proposal Treasury Secretary Janet Yellen has been promoting for more than a month to combat corporate flight.
Former President Trump fought the flight of corporations by lowering the maximum corporate tax rate from 35% to 21%, and slashing the hidden tax of burdensome regulations. This even wooed manufacturing back to the United States.
But Yellen calls lowering taxes a "race to the bottom," and Biden’s plan to dramatically raise taxes would send businesses scurrying to tax havens like Hungary or Ireland. Yellen wants to even the playing field with a global minimum tax of at least 15% — initially. Expect it to go up from there.
White House National Security advisor Jake Sullivan was elated.
"The world is closer than ever before to a global minimum tax," he said. "Great to hear the positive reception to our proposal and thanks to @SecYellen and our partners all around the world for their work on this. This is what it looks like to lead the world to end the race to the bottom."
But Yellen and Sullivan both assume a false premise — that maintaining low tax rates represents "a race to the bottom." It doesn’t.
Low taxes free up capital for investing into new product development and expanding facilities, and thereby adding to the workforce.
And the legislation of the last four months — both bills that have been signed into law and those that are proposed — is proof that the private sector is far better at responsible spending than the public sector.
CBS News reported that Biden wants to use the tax hikes to pay for his $2 trillion-plus infrastructure package, which has little to do with infrastructure.
One provision even calls for federalizing local zoning restrictions.
He calls it the American Jobs Plan, which will probably lose more jobs than it may create.
That’s on top of the $1.9 trillion COVID relief package he signed into law in mid-March, which had little to do with COVID relief.
Additionally, corporations don’t foot the complete complete bill on tax increases — not if they want to remain in business. Instead they act as a middleman and pass much of the burden on to the consumer and their employees.
Out of necessity they charge higher prices for their goods ands services, which amounts to a regressive tax to consumers — one that affects lower and middle income households far mare than the wealthy.
And the workforce also pays for corporate taxes in the form of reduced hours and layoffs.
That makes raising corporate taxes a lose-lose-lose-lose proposition.
- The company loses income and incentive to expand and improve their product line
- The consumer loses by paying more for the same goods and services
- The employee may also lose income
- Finally, despite the higher tax rate the U.S. Treasury loses revenue in the long run, simply because everyone is earning less
Moreover, the imposition of a global corporate tax would provide precedent for a global personal tax.
The late Ronald Reagan once said that Republicans believe every day is the Fourth of July — Independence Day — While Democrats believe every day is April 15th — tax day.
Although meant as humor, like all good humor is based on fact.
Biden is proof that Reagan was spot on.
Michael Dorstewitz is a retired lawyer and has been a frequent contributor to BizPac Review and Liberty Unyielding. He is also a former U.S. Merchant Marine officer and an enthusiastic Second Amendment supporter, who can often be found honing his skills at the range. Read Dorstewitz's Reports — More Here.
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