Why the Global Minimum Tax Threatens American Sovereignty

Why the Global Minimum Tax Threatens American Sovereignty
Why the Global Minimum Tax Threatens American Sovereignty

The name “Global Minimum Tax,” should immediately set off red flags. No American likes to hear the two words “global” and “tax” in the same expression. It implies a surrender of sovereignty to a vague and mysterious world body. They also don’t like to see “minimum” and “tax” together. Experience shows that taxes rarely stay minimal and tend to become maximal. Based on the name alone, it is best to trash the whole idea.

However, the Biden Administration wants to approve this disastrous idea. The three words that sound so threatening are proposed in the name of two words that everyone wants to see restrained: “Big Tech.” Thus, Treasury Secretary Janet Yellen is lobbying Congress, asking them to “please jump from the frying pan into the fire” to rein in Big Tech. American participation—she claims—will also show goodwill in cooperating with the “world community.” That’s two more ambiguous words that don’t belong together.

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A Flawed Plan that Bodes Ill for the Nation

Everything about Global Minimum Tax screams No! Yet the Administration is asking for an inexcusable yes. Americans should go with their gut instinct and reject the measure. The tax treaty will set dangerous precedents, unfairly target American industries and surrender tax sovereignty.

The project is the work of the Organization of Economic Co-operation and Development, which proposes a global tax treaty with two parts. OECD claims that the first part would attack the revenue-shifting practices of Big Tech firms that take advantage of foreign tax structures to avoid paying taxes on profits. It says the second provision is to level the tax playing field by establishing a global minimum tax rate of fifteen percent on large multinational firms. OECD claims it would do this by cracking down on business-friendly tax havens.

The plan consists of two treaties codifying the new tax. The proposal has met with stiff opposition in Congress by those who fear a negative impact upon specific sectors of the U.S. economy. Two broad objections must also be considered.

Taking Power from America

The first objection is a very serious shift in American tax tradition. The new tax will not deliver the collected monies to an outside international body. However, it will allow an outside body to dictate American tax policy. The U.S. thus becomes tied to foreign interests.

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The Catholic principle of subsidiarity holds that the powers of government should be exercised by the governing level closest to those affected by the laws. In the case of the giant companies affected by the Global Minimum Tax, that governing authority is the federal government. It needs to remain so.

The U.S. Constitution clearly states, “All Bills for raising Revenue shall originate in the House of Representatives.” It does not allow foreign nations or international bodies to determine tax rates or interfere in tax matters.

There are reasons why the taxing power is non-delegable.

For starters, Congress has some degree of accountability that limits the abuse that comes with keeping the purse strings. International organizations are unaccountable. They are run by faceless bureaucrats with no expected loyalty to America. Giving international bodies the power to regulate U.S. tax matters is unconstitutional and opens the way for abuse.

National security is another reason. The ability to tax is a sovereign prerogative that allows a nation to determine its destiny. When other bodies can affect tax policy, it can paralyze government action and allow rival nations to exploit the power to their advantage.

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Turning the Playing Field into a Minefield

The second objection to the Global Minimum Tax is its application and enforcement. If the tax did level the tax playing field, some might consider it an exercise of fair play. Nations would welcome it with open arms. Indeed, 130 of the 139 member nations of the Organization for Economic Cooperation and Development have already signed the agreement.

However, the reality on the ground is the contrary. The treaties lock in unfair treatment for Big Tech. They target American firms while excluding many foreign manufacturers. As the negotiations proceed, nations are working to carve out exemptions and special privileges favoring special interests. The vague provisions of the treaty show every sign of ballooning into a bureaucratic nightmare of regulation and overreach. Far from leveling the playing field, the Global Minimum Tax turns it into an explosive minefield.

Of particular concern is the kid-glove treatment accorded to China. It profits the most from these treaties. True to its communist ideology, Red China is notorious for signing international treaties and promptly disregarding them. China will use the treaties as a means to expand trade and continue its unfair practices. The rules-abiding United States will be left with an agreement that betrays the American worker again by making offshoring attractive. As the terrible Paris Agreement, these treaties are easy to enter but complicated to untangle and leave.

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The Global Minimum Tax is a disaster that must be avoided. It erodes national sovereignty, paralyzes government tax policy and puts American firms at a great disadvantage. It gives Americans no recourse beyond an international body that has skewed the rules against them.

The best minimum global tax is zero. Keep it away from America.

Published on American Thinker.

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