The battle of the decade is now between popular sovereignty and globalism. It will have far-reaching political, economic, and social consequences, even for taxation.
The Biden Administration has discovered a new issue for its vast globalist ambitions. It might surprise many, but it shouldn’t. Taxation is ripe for a global takeover so the whole world can suffer from the highest tax rates, collected and administered by a world government agency like the United Nations.
None other than Treasury Secretary Janet Yellen, Biden’s siren Wall Street mistress of finance, announced the plan last week. Like her boss, Yellen wants to do away with differences in tax structures, rates, and regimes not only between states but among all countries. This is the biggest socialist grab since 1917.
As economist Stephen Moore suggests, “For the last four decades, the left has sworn on a stack of Bibles that taxes don’t influence behavior and that high tax rates are no disincentive to growth. In fact, Biden’s gang of economists argue no negative impact from raising tax rates to their highest level since the 1970s.”
This is obviously untrue and absurd, and even the Left doesn’t believe it anymore. Does any thinking person really believe that the ongoing and real exodus from New York to Florida isn’t driven by 13 percent income tax in one place and zero income tax in the other? The same could be said for California and Texas. The numbers prove the point and people, like firms, are voting with their feet.
Now team Biden has inadvertently conceded that taxes do matter—perhaps a lot. They do influence behavior. They cause, according to Yellen, a “race to the bottom,” where every country tries to set tax rates lower than those of their neighbors. Assaulting the gains made by the Reagan and Trump administrations on tax policy is one of the most radical agendas Biden has set out to promote.
This has long been called tax competition. It is generally good. It is healthy. It is one of the greatest constraints on government known to mankind. Nobel economist James Mirrlees won this award for work showing that global financial capital migrates to countries with the highest after-tax rate of return.
The new Yellen solution, however, is a global minimum corporate tax rate.
This would create nothing short of a cartel of governments agreeing on a certain minimum—likely very high—tax rate. It amounts to a United Nations of tax policy. It will be an essential part of financing the plans enshrined in the 17 U.N. Sustainable Development Goals, as most developing countries (in the opinion of the global government types) levy taxes too low to sustain the sort of big-state mixed economy they consider morally unassailable.
Poor Nations Would Suffer, Rich Countries Would Thrive
The nations that would be hurt the most from this global tax would be the poorer nations that attract capital through low taxation. There is no good reason why every country in the world should be bound to a minimum percentage for taxation. You don’t have to hear black helicopters to think this is a first step to some form of global government—one of the greatest conceivable threats to human freedom.
The real ploy behind the current Yellen effort is to at least partially offset the disadvantages arising from Biden’s proposed increase in the U.S. corporate tax rate from 21 percent to 28 percent—necessary to pay for the $4 to 5 trillion to be spent during this administration by year two. It is an ambitious goal and a statement of what a globalist administration really wants in its heart of hearts: more taxes on everyone—and not just in America.
“Competitiveness is about more than how U.S.-headquartered companies fare against other companies in global merger and acquisition bids,” Yellen said in her virtual speech to the Chicago Council on Global Affairs. “It is about making sure that governments have stable tax systems that raise sufficient revenue to invest in essential public goods.”
There it is in black and white. The government knows best, and collective goods are always preferable. God forbid anyone figure out how to provide the same level of governance or services for less money.
Two truths should be disclosed at this point.
The first is that these negotiations on global taxes have been underway for some time at the Organization for Economic Cooperation and Development (OECD) in Paris. The urgency is simply to get other countries to accept similar minimums on (high) corporate tax rates.
Unmentioned is that Biden wants to penalize any countries that do not accept such minimum taxes by heaping higher taxes on their U.S. subsidiaries. His view is that using the stick will coerce them to conform to his will.
And what would stop the global body from moving tax rates higher and higher, which is what governments always try? Nothing. What is to stop them from installing the very highest European taxes on the rest of the world? Again, nothing.
The Trouble With Transnational Corporations
The second truth is that “coordinated tax systems” would need to take the form of a U.S. Senate-approved treaty, which is highly unlikely. The Democrats simply don’t have the votes. But this won’t stop Biden. This White House will likely try an “executive agreement” to circumvent the Constitution.
According to the all-knowing World Economic Forum, the question of how to tax increasingly globalized and digitized businesses is vital to the future health of cross-border trade and investment. “Sadly,” the WEF said in a 2019 publication, “the current debate is mired in confusion and complexity, and is not helped by populist political responses that demonize digital businesses.”
Maybe the WEF could become the world’s tax collector itself and skim off the top to support their own globalist “reset” agenda. Anything to prevent a national class of independent small business owners from forming a digital market independent of the global superstate.
Underlying this debate looms a larger contextual reality.
Transnational companies today, many of which are far larger than most sovereign countries, are just that: no longer national in scope or even multinational—they have become transnational and as such see themselves as above any and all national laws and governance. They respect no borders and take advantage of locales where they operate. They pay increasingly little heed to consumers and none to citizens. They are monopolistic to boot.
Woke-a-Cola and a thousand others like them run by elite McKinsey-type overpaid globalist CEOs who are detached from their bases, corporate cultures, and who thrive on transfer pricing and lowest common denominator mentalities are out of control. This is not capitalism as we knew it but rather a globalist mentality of mendacity and wokeism.
The battle of this decade is now between popular sovereignty and globalism. It will have far-reaching political, economic, and social consequences, even for taxation.
Transnational corporations are the key driver of globalization because they have been relocating manufacturing to countries with relatively lower unit labor costs in order to increase profits and returns for large shareholders and themselves. They would love minimum (even higher) taxes. But why should a knowing public, citizens in any nation-state, go along?