If you think a “global minimum tax” sounds like a whacky conspiracy theory, you’d be wrong. According to Vice President Joe Biden, it’s the answer for helping to spur manufacturing in the United States. Here are his remarks at a campaign event in Davenport, Iowa (in which he addresses the president of a manufacturing company) :
“For years, American manufacturers have faced one of the highest tax rates in the world. We want to reduce that by over 20%. We want to drop the rate, particularly, for high-tech manufacturers like you, Mr. President, even further than the 20%.
“We want to create a global minimum tax, because American taxpayers shouldn’t be providing a larger subsidy for investing abroad than investing at home.”
The problem is, America’s corporate tax rate is already exceedingly high — on Sunday, it will be the highest in the world. President Obama has offered a corporate tax reform plan that would wreak the same kind of harms that Biden’s global minimum tax would bring with it. Heritage’s J.D. Foster explains the President’s policy and its consequences:
His new proposal starts strong by reducing the federal corporate income tax rate to 28 percent from the current 35 percent. This is a good and long-overdue policy change. Regrettably, he marries rate reduction to a net corporate tax hike based in part on extending his policy to hammer and ultimately deconstruct U.S. multinational companies. The net effect is that his corporate tax reform would do more harm than good, representing yet another missed opportunity to help American workers.
The President’s plan would punish firms that outsource jobs by taxing foreign earnings even more heavily, with the goal of encouraging them to “insource” in the United States. But Foster explains that the policy would have the opposite effect — profitable multinational corporations would become ripe for sale to overseas companies who could buy up the assets and escape Obama’s tax penalty. And the global minimum tax would only make U.S. companies bigger targets for international takeover.
What’s the answer? Foster offers a recommendation:
The right solution is to pursue a revenue-neutral corporate tax reform, reducing the corporate tax rate as far as sound base broadening will allow. At the same time, in international matters the U.S. should move in exactly the opposite direction from what President Obama proposes so that U.S. companies can compete globally and not become tax-induced targets for foreign acquirers.