A Global Minimum Corporate Tax Is a Bad Idea

A high corporate tax rate forces multinational corporations to move their headquarters overseas in order to stay price competitive with other multinational corporations, i.e. a “race to the bottom.”

The U.S. had the highest corporate tax rate in the world until President Trump reduced it to a more competitive level.

Biden has proposed increasing the corporate tax rate again, but his policymakers must be aware that unless the U.S. can force independent nations to get on board with raising their’s too then effectively Biden would be incentivizing the offshoring of even more of America’s economic capacity.

Introducing: The Global Minimum Tax.

The G-7 recently endorsed a global minimum corporate tax rate of 15%.

Treasury Secretary Janet Yellen called it a return to multilateralism and a sign that countries can tighten the tax net on profitable firms.

Tech companies, in particular, pay relatively little in taxes where they operate. Does this mean Big Tech is against a Global Minimum Tax?

No. Nick Clegg, Facebook’s Vice President of Global Affairs, said the deal is a “step toward certainty for businesses” when it comes to taxes. An Amazon spokesperson called the agreement "a welcome step forward,” and a Google spokesperson said, "We strongly support the work being done to update international tax rules. We hope countries continue to work together to ensure a balanced and durable agreement will be finalized soon.”

When Big Tech supports a government action meant to curb its power then let that serve as a massive red flag.

Objectively, there are several reasons why a Global Minimum Tax Rate is a terrible economic policy…

For one, corporate taxes hurt workers. Studies show that for every $1 generated for the government, 65¢ is taken from workers’ wallets.

“High corporate taxes divert capital away from the U.S. corporate sector and toward noncorporate uses and other countries. They therefore limit investments that would raise the productivity of American workers and would increase real wages. This is the cruel logic of a corporate tax in a global economy—that its burden falls most heavily on workers.”

Secondly, to get the few small nations like Ireland who are beneath the 15% Global Minimum Tax to agree to the hike then the G-7 would have to threaten Ireland with penalties and tariffs to force her compliance. Imperialistic, eh?

Third, if a Global Minimum Tax was implemented, which would take years, and then assuming every nation on Earth agrees to it, then what is stopping nations from giving subsidies and tax exemptions to offset the rise of their corporate tax rate? If China gets on board with a GMT then you know this proposal is largely smoke-and-mirrors because their tech companies are effectively state-owned and heavily subsidized. To enforce the GMT somewhat fairly would require more global oversight and regulations, which big tech companies would be the best situated to take advantage of. If a GMT was implemented then I think Big Tech would become even more subsidized by taxpayers around the globe. In other words, corruption will rise!

But let’s put all that aside and assume the GMT would be implemented everywhere without any loopholes… I’d still argue it’d be a step in the wrong direction. It’s already easy enough for governments to take money from their citizens and businesses. We shouldn’t be building a global economic system around top-down force, but bottom-up freedom. Don’t compel obedience, but attract investment! The CEO of Microsoft has already warned us that we could live in 1984 world by… 2024. A GMT would be just one more step toward global authoritarianism. 

You’ve been warned.

With that said, taxes are necessary to any civilized society and I agree that the megarich should pay more so what is a better alternative than a Global Minimum Corporate Tax?

Introducing: A National Minimum Tariff

This is the exact sort of policy the megarich and the influence-industrial-complex hate, but it helped build the American Middle Class.

I’m not suggesting we go back up to the 30% - 50% import tariff we saw during the height of the Industrial Revolution, but what about to 5% or 10%? And then for nations that suppress free speech, which threatens us all in our global economy, what if we tack on an additional 5% to 10%?

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