The corporate tax ‘race to the top’ | EDITORIAL
If the titans of the food industry colluded to increase their profits by setting uniform prices for toilet paper, ground beef and other commodities, they would face federal criminal charges and likely end up in jail. However, when elected officials collaborate to manipulate the markets in order to run the tap with other people’s money, it is as if nothing had happened.
Last week, leaders of so-called G-7 countries gathered in Europe to discuss various issues as the world begins to emerge from the coronavirus pandemic. Topping the agenda was a plan pushed by President Joe Biden and his brains to unilaterally disarm in the battle for global competitiveness by imposing a statutory “minimum” tax rate of at least 15% in major western economies.
America first or last?
Progressives have decried a “race to the bottom” in which nations seek to attract jobs and investment by setting tax rates that do not punish entrepreneurs and successful businesses. Yet the freedom to escape punitive policies prevents governments – including the US Congress – from continuously raising taxes. A “minimum” tax – which will undoubtedly increase steadily and frequently – will create a “race to the top” which will hamper economic growth and increase poverty.
“University research shows that imposing higher corporate taxes is a very destructive way to collect income because it reduces investments and, consequently, workers’ wages,” notes VÃ©ronique de Rugy, senior researcher at Mercatus Center at George Mason University. . âIt also increases consumer prices. Plus, let’s face it, no nation has ever gotten richer and better through higher taxes and redistribution of wealth. “
The “minimum” tax scheme is part of the Biden administration’s plan to confiscate $ 2 trillion from US corporations over the next decade to pay for its massive spending explosion. The president seeks to raise the corporate tax rate to 28 percent – a 33 percent increase – and realizes it will lead to a loss of investment unless he can persuade the rest of the world to accompany him.
Currently, “capital will go to countries with the best set of public services, such as infrastructure and education, at the lowest tax cost,” notes Jack L. Mintz of Canada’s Financial Post. âIt’s clear why governments don’t like this form of competition. They prefer the cartelization of the tax system in order to be able to accumulate taxes on multinationals to finance their expenses. But it’s not clear why citizens shouldn’t like it.
If the Biden administration believes the U.S. corporate tax structure needs reform, let’s have a debate in Congress rather than handcuffing the nation to a policy that will cover increasingly higher corporate taxes, putting U.S. businesses at a disadvantage. in the world market.