House Republicans will repudiate U.S. Treasury Sec. Janet Yellen after she told other countries that America is supporting a global tax plan aimed at punishing multinational corporations.
The Defending American Job and Investment Act (H.R. The 3665) would impose retaliatory taxation on countries that impose harsh taxes against American companies. The bill is not a surprise. This bill is a response to Yellen’s statement to global leaders, that the U.S. wanted to participate in a global tax that would reward European companies while punishing American ones.
First, other countries can impose taxes on tech multinationals. Second, a country like France or Germany can impose “top-up taxes” on American companies whose effective global tax rates are below 15%. We warned that Ms. Yellen’s participation in this circus of taxation was bad policy, bad legislation, and bad diplomacy from the beginning. And now we’re here.
The Biden Administration’s policy was to use a global increase in tax rates as a way to offset the negative impact of the proposed corporate tax hikes on U.S. firms. The OECD refused to set a minimum tax rate that was anywhere near what the Administration wanted for the U.S.
Europeans and other negotiators outwitted Ms. Yellen, too, by securing favorable treatment for the tax credits that are preferred in Europe and punishing those credits and deductions which Congress has traditionally offered U.S. businesses. This global tax regime, if it were implemented, would actually make the U.S. less competitive.
The Biden administration wants to join the European nations that have already begun to implement this tax. Switzerland is the latest country to start the transition to the 15 percent global minimum corporate tax.
Switzerland plans to implement a 15% corporate tax on global multinationals entirely through their economically most relevant units. https://t.co/WbrXXD7gAj
— Bloomberg Tax (@tax) June 4, 2023
This plan is stupid and comes at a time that the economy is still in a downward spiral. The new taxes on businesses will result in higher prices, which most Americans cannot afford right now. The inflation rate is still high but a recession is on the horizon. Americans will be forced to make tougher decisions in the next year. It is foolish to agree to a global corporation tax when all this is on the horizon. This will be a direct attack on the middle and lower classes, which the Biden administration has sworn to protect.
According to the jobs report from last week, which showed that there is a healthy job market, but also that many Americans work second jobs, barely managing to make ends meet, this should be an indication that we need not increase, but rather ease, financial burdens for Americans. This tax would accomplish that.
Janet Yellen, who should know better, has made yet another unconstitutional decision by the Biden Administration. It is the House of Representatives that has the power to tax, so to agree to it without bringing this to the House of Representatives is unconscionable. We already have agreements in place on taxes, through different treaties. Changes to these agreements would need to be approved by the Senate in order to be constitutional. However, the Treasury Department is already looking into statutory alternatives to this.
It’s unlikely that Joe Biden will sign the Republican bill, which would counteract all of this. But it is a warning shot, as noted by the Wall Street Journal editorial staff this morning. The bill sends a message to the rest of the world, that the U.S. does not support the sanctions and will fight any attempt to punish American firms.
