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Politics The Biden 15 percent global tax puts foreign companies ahead of American workers

06:00  28 november  2021
06:00  28 november  2021 Source:   thehill.com

A minimum corporate tax would ensure everyone pays their fair share

  A minimum corporate tax would ensure everyone pays their fair share As Democrats continue their work on finalizing the Build Back Better plan, hopefully they will keep workers in mind who rely on these jobs to provide for their families by supporting a minimum corporate tax as opposed to a corporate tax increase. Parris Glendening served as governor of Maryland from 1995-2003.

Instead of restricting competition with a 15 percent global minimum tax that is nothing more than a gift to China, the United States should be pursuing low tax policies that welcome investment and will secure our nation’s position as the leading economy in the world. The Tax Cuts and Jobs Act that was passed in 2017 created economic growth in America that eclipsed the economies of most of the G-7 countries. This tax reform eliminated the minimum corporate tax and reduced the top corporate tax rate to 21 percent, incentivizing U.S. companies to invest here at home instead of overseas.

The new tax would apply a minimum 15 percent tax rate on income reported on financial statements of corporations with at least 0 million of book income. Overall, the president-elect’s business tax proposals are a combination of complex takeaways and giveaways that overall raise taxes and reduce, and in some cases, eliminate current advantages of foreign relative to domestic investment. Biden could achieve largely the same goals in a far simpler way by keeping the corporate rate close to 21 percent, repealing the tax deduction for FDII, and moving to a worldwide system.

a close up of text on a white background: The Biden 15 percent global tax puts foreign companies ahead of American workers © The Hill The Biden 15 percent global tax puts foreign companies ahead of American workers

President Biden recently spearheaded an agreement among the G-7 nations to implement a global minimum corporate tax rate of 15 percent. The agreement has received the support of 130 other countries including China, Russia, and India. Notably withholding their support are several major tax havens, including Ireland, Hungary and others.

The agreement, if fully implemented, would reduce competition among the world's major economies and secure a tax funding base for financially strapped nations, particularly those in Europe, with bloated social spending budgets. President Biden says the agreement shows that "America's back." However, the agreement would surrender America's tax sovereignty to a coalition of nations who believe in high taxes and huge government spending. The tax is an essential part of President Biden's plan to greatly expand the role of the federal government in America's economy at a level not seen since World War II.

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The new global minimum tax of 15 percent would seek to roll back the decadeslong decline in corporate tax rates, which has hindered governments across the globe from appropriating funds for various spending programs. "We reached a historic agreement for a fairer and more effective international tax system," Italian Prime Minister Mario Draghi said at the opening of the summit in Rome. The deal would represent a major victory for Biden and Treasury Secretary Janet Yellen, who have championed an international floor on corporate taxes and pushed for a deal to come together

Joe Biden ’s plans to overhaul the international tax system face mounting opposition from his Republican opposition who have called the proposals “crazy” and are threatening to block the historic deal’s passage in the US. Those efforts were rewarded over the weekend when the G7 group of wealthy nations backed a global minimum rate of at least 15 % and agreed that countries should be able to tax some of the profits made by big companies based on the revenue they generate in that country, rather than where they are based for tax purposes.

The Tax Cuts and Jobs Act that was passed in 2017 created economic growth in America that eclipsed the economies of most of the G-7 countries. This tax reform eliminated the minimum corporate tax and reduced the top corporate tax rate to 21 percent, incentivizing U.S. companies to invest here at home instead of overseas. The United States hung out an "Open for Business" sign which attracted billions of dollars of investment and generated explosive job growth not seen in decades.

President Biden and many Democrats in Congress are working vigorously to reverse this growth. Their support for a global minimum tax is one of at least 30 proposed tax increases on American families and businesses that will total around $2.975 trillion over the next 10 years. These tax increases include raising the top corporate tax rate to 28 percent, which, when state taxes are included, balloons to an average rate of 32 percent. This is significantly higher than the average corporate tax rate of most nations in Europe (23 percent) as well as China (25 percent).

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The Biden administration is pushing a misguided 21 percent global corporate minimum tax on American businesses. At the same time, the administration is pushing for a global agreement amongst foreign countries to set a foreign minimum tax rate of 15 percent . This is a terrible idea that, if successful, will surrender U.S. sovereignty to foreign leaders in Russia, China, Saudi Arabia, and the European Union in order to bind the world into higher taxes and bigger government.

The agreement would impose a minimum 15 percent corporate tax rate in nearly every country in the world and punish the few holdouts who refuse to go along. The O.E.C.D. estimates the accord will raise 0 billion per year globally from tax -fleeing companies . It also proposed penalties for companies that operate in the United States but keep their headquarters in countries that refuse to join the global deal and put in place a similar minimum tax . The global minimum tax that Mr. Biden endorsed would be enacted separately by every country, in an attempt to eliminate havens with rock-bottom tax rates.

The global minimum tax is also subject to significant manipulation by nations seeking to gain an edge through offsets and work arounds. China's state-controlled media already is calling for massive exemptions. Russia and India are likely to follow suit. Most significantly, many tax haven countries like Ireland who have seen their economies grow rapidly due to their low tax regimes are not expected to sign on to the minimum tax.

Treasury Secretary Yellen calls the current tax policies of China, Russia, India, Ireland, and other nations a "race to the bottom" to attract business at the expense of their budgets. Another term for this is competition, so it is easy to predict that that even if the global corporate tax agreement is ratified, many of these nations will find a way to undermine it to better compete.

President Biden's tax policies amount to a surrender in this race for business. He is not only pressing for the global minimum tax, but he is basing its implementation in the United States on book income rather than taxable income, further disadvantaging American companies over foreign workers and companies.

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Many big global companies , such as Google, have bases in Ireland which has a corporate tax rate of just 12.5%. The move - which is expected to hit digital giants like Amazon and Facebook - will affect firms with global sales above 20 billion euros (£17bn) and profit margins above 10%. "[This] is a far-reaching agreement which ensures our international tax system is fit for purpose in a digitalised and globalised world economy," said OECD Secretary-General Mathias Cormann. "We must now work swiftly and diligently to ensure the effective implementation of this major reform."

Biden 's latest executive order aims to boost food aid to low-income families and children and get the already-approved stimulus checks to Americans who don't routinely file taxes and aren't easily reached by the Treasury. Still, while Biden 's efforts will provide "a critical lifeline" to millions of Americans His agenda next week includes steps to beef up requirements for the government to purchase goods and services from US companies , a push to eliminate private prisons, reestablishing the President's Council of Advisors on Science and Technology, rescinding the so-called Mexico City policy blocking federal

Should the Biden global minimum corporate tax go into effect, those losing most will be American consumers and workers. By eliminating competition, this tax, on top of his other tax increases, will make America even less competitive and drive jobs, manufacturing, innovation and investment overseas. It will encourage the flight of business to those nations, like Ireland, who do not sign on or to countries like China, who will effectively ignore the tax while making a show of agreeing to it.

The American economy is just beginning to emerge from the damage wreaked by the pandemic. We are also engaged in fierce competition with China, which is seeking to become the world leader in technology and other critical industries. Instead of restricting competition with a 15 percent global minimum tax that is nothing more than a gift to China, the United States should be pursuing low tax policies that welcome investment and will secure our nation's position as the leading economy in the world.

Congressman Erik Paulsen represented Minnesota's 3rd District from 2009 to 2019. He was a leading member of the chief tax writing Ways and Means Committee. He was also the Chairman of the Joint Economic Committee, which focuses on innovation, entrepreneurship, digital trade, and economic issues.

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usr: 1
This is interesting!