In 2017, President Trump and the Republican-led Congress passed a large tax reform package, one which included lowering the top corporate tax rate from 35% to 21%. Part of the idea behind this was to ensure that corporations have less of a reason to leave the United States and perhaps to incentivize others who had taken their business abroad to repatriate back home – all in the name of helping to create more jobs for America’s labor force.
Now, President Biden and the Democrat-led Congress want to undo this progress and once again raise the corporate income tax – something that would not help an ailing economy that is trying to recover from the pandemic and its subsequent economic shutdown.
Biden’s Treasury Secretary Janet Yellen thinks she’s come up with a clever idea. In order to prevent other countries from having a lower, more competitive tax rate than the United States, she has proposed a global minimum tax. She claims this would prevent a “race to the bottom,” where countries try to outdo each other by lowering tax rates to attract business.
The very suggestion of this idea means that Yellen and the Biden administration clearly recognize a principle of the free market: competition. Yes, it works. However, they do not want the invisible hand to do its job by attracting capital and labor in a way that Adam Smith might recognize. Instead, they would rather have the very visible hand of not just one government, but many governments, coordinating with each other in such a global fashion that it makes globalists look like they have been asleep at the wheel for decades.
In a recent speech to the Chicago Council of Global Affairs, Treasury Secretary Yellen added that “America first must never mean America alone.”
What’s truly remarkable is that in the rest of her speech she went on to describe global crises in poverty, the environment, and COVID19, admitting that more than half the globe will not see any of the COVID19 vaccines for quite some time due to their inability to afford it.
“The result will likely be a deeper and longer-lasting crisis, with mounting problems of indebtedness, more entrenched poverty, and growing inequality,” she said. Yellen estimated as many as 150 million people could be pushed into extreme poverty this year, which “would be a profound economic tragedy for those countries, one we should care about.”
Perhaps allowing those countries to set whatever corporate tax rate to attract more business for their starving labor force would be a good place to start if we truly “care about” them. As an American, I want as many jobs as possible to stay in America. However, we (including Ms. Yellen) all know that if we raise our corporate tax rate, we should expect some U.S. corporations to move some of their operations overseas and pay taxes in countries that have a more favorable tax environment. That means less jobs for Americans.
But the very idea we would ask other countries, including those struggling with high levels of poverty, to agree to a global minimum corporate tax rate, is really mind-boggling. It’s almost like asking China to agree to our standard of human rights.
The entire premise of this proposal means that Ms. Yellen understands economics very well and is intent on abandoning the true and tried economic principles of a free society towards one where the brute force of government imposes taxation on all of us – and leaves us nowhere else on the planet to escape. Good thing for us, this proposal won’t see the light of day. However, it does shed some light on the true ideological underpinnings of the modern Left and just how far they are willing to go.
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