Sen. Pat Toomey, R-Penn., calls the Secretary’s plan a ‘terrible deal’ on ‘Kudlow’
President Biden and leaders of the G-7 group of nations will endorse a global minimum corporate tax rate of at least 15% on Friday, a policy that could ultimately drive business investment away from the U.S.
That’s according to the Taxpayer Protection Alliance (TPA), a nonprofit advocacy group based in Washington, D.C., which argues that a higher global minimum rate would ultimately be “passed on to workers and consumers through reduced compensation and higher prices.”
WHAT IS A GLOBAL MINIMUM TAX RATE, AND HOW WOULD IT WORK?
“We won the race to the top, having the highest corporate tax rate in the industrialized world prior to the tax reforms of 2017,” TPA vice president of policy Patrick Hedger said. “It contributed to decades of anemic growth.”
Prior to the passage of the 2017 Tax Cuts and Jobs Act, the U.S. corporate tax rate sat at 35%; it’s now at 21%.
“When America dropped its rate to a competitive 21%, investment, jobs, and wages flourished prior to the onset of the pandemic,” Hedger said. “Biden’s global minimum corporate tax isn’t so much about ending the competition between nations, but rather ending the competition between progressives’ wishes and reality.”
There is some evidence to suggest that corporate taxes are ultimately borne by workers and consumers. A recent analysis conducted by the Tax Foundation suggested that up to 70% of the tax burden falls onto labor. As the tax reduces investment, productivity and wages, the dollar amount of the cost to labor may exceed the revenue raised by the tax by a “wide margin,” the Tax Foundation said.
But the Biden administration is arguing the minimum rate will build a more equitable tax system that will help “deliver a foreign policy for the middle class and will help support working families everywhere.” Money raised from the higher tax would go toward funding infrastructure initiatives, as well as child care, affordable housing and education, according to a White House fact sheet.
The strategy is intended to crack down on companies that employ a litany of tactics to reduce their tax liability, often by shifting profits and revenues to low-tax countries such as Bermuda, the Cayman Islands or Ireland, regardless of where the sale was made.
The practice by American and foreign multinationals costs the U.S. tens of billions of dollars each year, according to the Treasury Department.
Yellen and the Biden administration recently embraced a long-stalled effort to revamp the international tax system, throwing the full weight of the U.S. government behind a broader effort to crack down on tax avoidance by multinational corporations.
By getting all countries to agree to a minimum corporate tax rate, the White House is seeking to eradicate certain tax havens without hurting the competitiveness of American firms.
The worldwide average corporate income tax rate, measured across 177 countries, is 23.85%, according to a recent analysis conducted by the Tax Foundation, a non-partisan organization.
Among the G-7 nations the average rate is slightly higher – 24% – a significant decline from 1980, when corporate tax rates around the world averaged about 40.11%.
Originally Appeared Here