Global minimum tax threatens American sovereignty
The Biden government’s proposal would continue to subject us to the authority of international bureaucracies.
Treasury Secretary Janet Yellen is preparing to launch a lobby lightning bolt in Congress to tie in support for a “global minimum tax,” which is emerging as an integral part of President Joe Biden’s efforts to restore the liberals torn by the Trump presidency international order. The Biden administration sees the initiative as an opportunity to gain support for its ambitious domestic tax hikes and to enjoy cosmopolitan allies abroad.
The plan negotiated by the Organization for Economic Co-operation and Development is vague, but it focuses on two main pillars: first, ending the revenue-shifting practices of American technology companies, and second, introducing a global minimum tax of 15 percent on large multinational corporations. To achieve this, the Biden government hopes to ratify two treaties codifying the new minimum tax.
The plan has been vigorously challenged by Republican leadership, including Ways and Means Ranking Member Kevin Brady and Senate Minority Leader Mitch McConnell. Your arguments are a strong economic argument against global tax treaties. The conservative opposition must also defend the subsidiarity principle against liberalization and integration. Models, profits, and the endless standards of economic success may change, but the autonomy of American citizens must consistently be viewed as absolute.
The proposed global tax treaty, as presented in a characteristically vague five-page memo, should clearly be understood as a threat to American sovereignty. If implemented, it will erode the constitutional revenue collection system in favor of a European-style international bureaucracy that will cripple critical domestic institutions and allow economic exploitation by foreign rivals.
Our Constitution clearly states that “all bills to increase revenue come from the House of Representatives” – unaccountable international organizations. In a country founded to resist taxation without representation, it would be ridiculous to put the power of Congress under faceless global managers. Unfortunately, the project is just another episode in the Biden government’s dismantling of traditional American political and social values.
The ongoing negotiations have won the support of 130 of the 139 member states of the Organization for Economic Co-operation and Development. If the tax treaty were ratified by the Senate, Americans would leave control of their taxation to the diplomatic whims of the Parisian left, London dealers and Japanese manufacturers. Arbitrary, internationally determined tax rates would render congressional fiscal decisions meaningless and thus the will of their constituents meaningless and cause a crisis of federal sovereignty.
Even more worrying is the little mention of enforcement and organization in the tax agreement plan, which leaves the prospect of European Union-style integration and nightmarish bureaucratic overhang open. Typically, international organizations operate Mission Creep, which tends to massively expand the power of their charters and diminish the power of the people and nations for whom they were created. Take, for example, the failure and abuse inherent in the actions of the WTO, the IMF and the EU litany. Projects.
Like the WTO, a bloated, inefficient international tax bureaucracy could rob Congress of its ability to remain agile in an increasingly competitive economic race with China. Just as the WTO has allowed China to mock the rules-based order and act as a rogue state, the guiding authority of the new tax system could easily be thwarted by our opponents.
If China chooses to treat the global tax treaty with the same contempt it has treated international law and treaties in the past, the rule-abiding US would be obliged to put justice in the hands of an international bureaucracy and hope for fair arbitration . As we have seen in the performance of the World Health Organization, such remedies are unreliable at best and corrupt at worst. The US could be in a state of total paralysis as our remaining industries relocate overseas and years of competitive disadvantage wreak havoc on US manufacturing.
If the American people had already reached such an agreement and regretted the bad decision of their leaders, the US would be forced into a grueling project of unilateral unbundling, for which the current political environment is not conducive. The political dissolution would be more similar to the institutionalized Brexit debate than even the heated debates about the Paris climate agreement or the Iranian nuclear deal in US politics.
Dissolving a web of complex international treaties, adapting the already controversial national tax code, and persuading our allies in Europe to further integrate with China would be a task that would require bipartisan and inter-agency unity that would be unthinkable in our current political climate. Even with a wave of bipartisan action against bad foreign actors, it would be impossible for two-thirds of the Senate to roll back an important achievement of the liberal international project. The consequence would be that China would have a free hand against contracting states, while the political will of the US would be exposed as insufficient to lead the rule-based liberal order it has created.
The Biden government is betting that a new generation of liberal internationalist projects will save their young ideological aspirations. But a twofold disaster, in which further globalization allows China and other competitors to deal another blow to American workers – and where those affected citizens are only denied legal recourse after being deprived of their representation – is predictable and avoidable. It is up to Congress to decide whether international cooperation on a “global minimum tax” should destroy the American people’s right to self-government.