The U.S. administration is so desperate to collect dollars from corporations that it is appealing to its global brethren to achieve higher taxation rates. Because the White House is thirsty for revenues to pay for its astronomical spending schemes over the next decade, President Joe Biden’s tax-and-spend acolytes are pleading with their counterparts on the international stage to synchronize. However, with uncertainty among the Organisation for Economic Co-operation and Development (OECD), the Oval Office is hedging its bets on the tight-knit Group of Seven (G7) club to impose higher taxes. Today, the G7. Tomorrow, the world!
G7 to the Rescue
In a statement following a meeting in London, the finance ministers and central bank governors of the G7 committed to pushing for a global minimum tax of at least 15% in international negotiations. Although 15% is the base rate, representatives say that a corporate tax would be applied on a country-by-country basis. Officials from the U.S., Canada, France, Germany, Italy, Japan, and the United Kingdom agreed “to address the tax challenges arising from globalisation and the digitalisation of the economy and to adopt a global minimum tax.”
The world’s wealthiest nations asserted that this “historic” pact to rein in tax avoidance and prevent nations from undercutting each other would “end the race to the bottom” and “ensure fairness for the middle class and working people” across the globe.
U.K. Chancellor of the Exchequer Rishi Sunak, who had initially been apprehensive about this arrangement, called the framework “fit for the global digital age.” Olaf Scholz, the German finance minister, told reporters that this was “very good news for tax justice and solidarity and bad news for tax havens.” U.S. Treasury Secretary Janet Yellen informed the press that these efforts are “far from over,” emphasizing the importance of “leveling the playing field for businesses.”
But this is not all. G7 finance officials added that they plan to coordinate new international tax rules, digital services penalties, and “other relevant similar measures.” Put simply, the best is yet to come.
The Group of 20 (G20) is planning to reach a comparable agreement sometime next month. The OECD is still holding deliberations, attempting to iron out details and address concerns from the more impoverished countries. President Joe Biden and his team have been proposing a global minimum tax for months, contending that this would make sure that American companies remain competitive in the global marketplace and pay their fair share. But is it about equity or crippling debt?
Dignity or Desperation?
Countries are hemorrhaging cash right now. Most nations went into enormous debt due to the coronavirus pandemic, whether it was funding unemployment or subsidizing businesses to keep their doors closed. It is estimated that global government debt is about $277 trillion – and counting. While many governments were not exactly paragons of fiscal conservatism before the COVID-19 public health crisis, politicians have been running the faucet of money non-stop for the last 15 months. Even when leaders have turned the spigot off, there is a slow drip of deficit-financed spending.
Suffice it to say, the United States and its partners need a spike in revenues to avoid running off a fiscal cliff a la Wile E. Coyote. For Washington, it is essential to extract more money from the private sector because President Biden proposes spending trillions of dollars more in addition to the trillions of dollars already on the books.
A global minimum tax is being marketed as a plan for fairness. In reality, it is a scheme to fleece more bucks, euros, loonies, yen, and pounds from organizations that are producing something. Politicians likely think this is guaranteed revenue, but all it does is strangle the private sector, reduce capital and investment, raise the price of consumer goods, and make everyone less competitive.
Biden’s MAGA Moment
Under the previous administration, the U.S. was apathetic about what others in the international community thought. Former President Donald Trump ditched the Paris Accord, bullied NATO, slammed the United Nations, and avoided Palestinians during peace negotiations in the Middle East. Today, the incumbent president is making America globalist again, supplicating with other anguished states to pursue this progressive public policy as a panacea to plug the sea of red ink. The question is: Will this massive taxation effort even be enough to cover the annual multi-trillion-dollar tab Uncle Sam is running? Moreover, if there are zero consequences to higher corporate tax rates, especially if they are uniform worldwide, why stop at 15%? Why not boost the figure to 25%, 50%, or 75%?
Rather than trimming pandemic era spending, the Biden agenda is embracing a different type of MAGA.
Read more from Andrew Moran.