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Posts Tagged ‘Global Minimum Tax’

Erie Times E-Edition Article-What’s a ‘wealth tax’ and how would it work?

Posted by M. C. on October 27, 2021

Biden has vowed his programs will not add a penny to the deficit,

House Speaker Nancy Pelosi estimated Sunday on CNN the tax would raise $200billion to $250billion. This is a meaningful sum, but it’s well shy of the nearly $2trillion in proposed additional spending over 10 years being negotiated right now. This means additional levies such as the global minimum tax and increased enforcement dollars for the IRS would still be needed to help close the gap.

Global minimum tax, IRS…scary. I am guessing the definition of “wealthy” will change dramatically in the not too distant future.

https://erietimes-pa-app.newsmemory.com/?publink=2fe8dc74b_1345f77

Josh Boak ASSOCIATED PRESS To help pay for his big economic and social agenda, President Joe Biden is looking to go where the big money is: billionaires.

Biden never endorsed an outright ‘wealth tax’ when campaigning last year. But his more conventional proposed rate hikes on the income of large corporations and the wealthiest Americans have hit a roadblock.

That leaves a special tax on the assets, not the income, of billionaires being proposed by a Senate Democrat as a possible vehicle to help pay for child care, universal pre-kindergarten, child tax credits, family leave and environmental initiatives.

Biden has vowed his programs will not add a penny to the deficit, which means selling to Congress and voters a tax on the wealthiest .0005% of Americans. Some details on the proposed billionaires tax:

How would it work? Essentially, billionaires earn the bulk of their money off their wealth. This might be from the stock market. It could include, once sold, beachfront mansions or the ownership of rare art and antiquities. A triceratops skeleton.

This new tax would apply solely to people with at least $1billion in assets or $100million in income for three straight years. These standards mean that just 700 taxpayers would face the additional tax on increases to their wealth, according to a description obtained by The Associated Press of the proposal of Senate Finance Committee Chairman Ron Wyden of Oregon.

On tradeable items such as stocks, billionaires would still pay a tax even if they held on to the asset. They would be taxed on any increases in value and take deductions on losses. Under current law, those assets get taxed only when they’re sold.

Billionaires would also face an additional tax on non-tradeable assets such as real estate and business interests once those assets are sold. During the first year of the proposed tax, the billionaires would also owe taxes on any built-in gains that predate the tax.

How much money would it raise? House Speaker Nancy Pelosi estimated Sunday on CNN the tax would raise $200billion to $250billion. This is a meaningful sum, but it’s well shy of the nearly $2trillion in proposed additional spending over 10 years being negotiated right now. This means additional levies such as the global minimum tax and increased enforcement dollars for the IRS would still be needed to help close the gap.

And the forecasts for revenue from the wealth tax are highly debatable.

‘It’s just impossible to implement,’ said Allison Schrager, a senior fellow at the conservative Manhattan Institute. ‘There’s a lot of evidence that these things don’t work, and I’ve never heard an explanation of how this could be workable.’

Why would Biden go this route? The president would rather raise corporate tax rates and rates on wealthy individuals. That was his initial proposal, but he’s got to appease West Virginia Sen. Joe Manchin and Arizona Sen. Kyrsten Sinema. Those are the two make-or-break Democratic votes in the evenly split Senate. Sinema objected to higher rates, which brought the wealth tax into play as an alternative.

The idea gained steam after the publication of French economist Thomas Piketty’s book ‘Capital in the Twenty-First Century.’ Massachusetts Sen. Elizabeth Warren made a 2% wealth tax a trademark policy in the 2020 Democratic presidential primaries, and fellow candidate Bernie Sanders, the senator from Vermont, proposed his own wealth tax.

Biden never jumped on that bandwagon. But he did make higher taxes on the wealthy a key promise, saying no one earning less than $400,000 would pay more.

Are billionaires really that rich? Seems that way.

There is a legitimate debate about the optimal forms of taxation. Is it better for the economy for the wealthy to keep their assets invested in new businesses? Or, is it better for some of their money to go to the government to help fund programs like child care, universal pre-K and shifts to renewable energy?

What is clear is the wealthy do have money to tax, should the government wish to do it.

America’s billionaires have seen their collected wealth surge 70% since the start of the pandemic to over $5trillion, according to an analysis by the pro-wealth-tax Americans for Tax Fairness and the Institute for Policy Studies Program on Inequality. That gain from March18, 2020, to this past month is equal in size to Biden’s spending plans over 10 years.

‘Right now, billionaires are not paying a dime in taxes on their fabulous income gains from their stock holdings during the pandemic,’ said Frank Clemente, executive director of Americans for Tax Fairness. ‘The billionaires income tax would tax the increase in the value of those assets each year just like workers’ wages are taxed.’

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Biden and Janet Yellen Are Pushing a Global Minimum Tax Rate. The EU Is Very Pleased. | Mises Wire

Posted by M. C. on April 8, 2021

So, for at least a decade, EU politicians have openly complained that tax competition is “a threat to the European Union.” The regimes in the west don’t like having to deal with smaller, poorer regimes that can offer lower taxes to employers, investors, and producers.

https://mises.org/wire/biden-and-janet-yellen-are-pushing-global-minimum-tax-rate-eu-very-pleased

Ryan McMaken

It has long been a dream of central planners and interventionists to set global, uniform tax rates for all regimes. These globalists know that so long as sovereign states have the ability to freely set their own tax rates, some regimes are tempted to engage in “tax competition” in order to attract capital. When this happens “tax havens” allow companies and individuals to “shop around” in terms of where to put their productive wealth.

The antidote to this “problem,” we are told, is so-called tax harmonization. Under tax harmonization schemes, all governments are forced to impose a certain minimum tax rate so that high-tax countries need not compete with low-tax countries. Noncompliance comes with sanctions.

Without tax havens, of course, regimes have more freedom to raise taxes to ever higher levels because the gap between the high-tax regimes and low-tax regimes is significantly lessened.

So, it should surprise no one that President Biden’s Treasury secretary Janet Yellen is now pushing for a global minimum corporate tax, and for an increase to the US corporate taxes:

U.S. Treasury Secretary Janet Yellen on Monday urged the adoption of a minimum global corporate income tax, an effort to at least partially offset any disadvantages that might arise from the Biden administration’s proposed increase in the U.S. corporate tax rate.

Citing a “30-year race to the bottom” in which countries have slashed corporate tax rates in an effort to attract multinational businesses, Yellen said the Biden administration would work with other advanced economies in the Group of 20 to set a minimum.

Naturally, such a scheme doesn’t work without a means to punish countries that don’t cooperate. According to Reuters,

The U.S. plan envisages a 21% minimum corporate tax rate, coupled with eliminating exemptions on income from countries that do not enact a minimum tax to discourage the shifting of jobs and profits overseas.

In other words, “Biden’s corporate tax measure would also penalize other countries without a minimum corporate tax by more heavily taxing their subsidiaries in the U.S.”

A Long War on Tax Competition

The US’s new attack on tax havens and tax competition comes after years of attempts by the EU and the Organization for Economic Co-operation and Development (OECD) to impose enforceable minimum tax rates. The OECD is currently in the process of negotiating what Daniel Mitchell calls a “global high tax cartel.”

Moreover, the European Commission has been complaining for many years about low-tax member states within the bloc.

In early 2019, for example, European Commission president Jean-Claude Juncker pushed the idea of ending the ability of EU members to veto changes in tax policy so as to make tax rates across EU countries more equal. Ireland and Hungary, which have adopted low tax rates to attract businesses, have long opposed such efforts. Malta has vehemently objected as well.

In the EU, France and Germany—the largest and most powerful states in the bloc—have pushed for an EU-wide corporate tax policy for years. Germany and France have already announced plans to bilaterally pursue a common corporate tax policy, but this is just the first step. The next step is to impose minimum tax rates on the rest of Europe as well.

Europe isn’t the only place where regimes have hoped to attract capital with low tax rates. Small island nations in the Caribbean also function as tax havens and have earned the ire of the European Union’s leadership.

In many ways, the effort to achieve tax harmonization is also a war on small countries, waged by big, powerful countries.

After all, small countries have limited tools in attracting capital. All else being equal, small countries that use small-time local currencies are at a disadvantage in a world of competing fiat currencies. Small countries also potentially have less access to ready labor and other inputs necessary for production. Finally, small countries are at a disadvantage when they are physically located far from other centers of capital. This is the case for many Caribbean and eastern European countries.

East vs. West and Rich vs. Poor

One way small countries can compete is by lowering corporate tax rates. This is partly why Ireland, Malta, and Hungary have all pursued low-tax policies. In fact, in 2019, Hungary slashed its corporate tax rate to 9 percent from 19 percent. Ireland—which has long been at the periphery of Europe and was considerably poorer than the rest of Western Europe as late as the early 1990s—has now become known for its relatively low corporate tax rate, which now stands at 12.5 percent. In contrast, France’s corporate tax rate as of 2020 was 32 percent. Germany’s rate was 29.9 percent. Indeed, it is no coincidence that the old established economies of the EU—France, Germany, Spain, Italy, and the Low Countries—all have higher corporate tax rates compared to the old Iron Curtain countries.

In Poland and Czechia, for example, the corporate tax rate is 19 percent. It’s 16 percent in Romania. Naturally, after the end of the Soviet Union, these countries sought to raise their standards of living and enter the global marketplace. One way to attract capital was to make their economies more attractive to foreign capitalists.

The rich west of Europe has never approved of this strategy.

So, for at least a decade, EU politicians have openly complained that tax competition is “a threat to the European Union.” The regimes in the west don’t like having to deal with smaller, poorer regimes that can offer lower taxes to employers, investors, and producers.

Now, it looks like the US is joining this effort to force smaller, poorer countries to raise their tax rates. The Trump administration threw a bit of a wrench in the EU’s plans to harmonize taxes when Trump was able to win approval of a corporate tax cut from 35 percent to 21 percent. That presented an indirect threat to the Franco-German plan to turn the industrialized world into one big high-tax bloc. But now with Biden in the White House, the US looks like its “ready to help” by raising US rates to a France-friendly 28 percent, and by also pushing for a new global tax regime. 

The high-tax regimes of the world will be more than happy to join in.  Author:

Contact Ryan McMaken

Ryan McMaken (@ryanmcmaken) is a senior editor at the Mises Institute. Send him your article submissions for the Mises Wire and Power&Market, but read article guidelines first. Ryan has degrees in economics and political science from the University of Colorado and was a housing economist for the State of Colorado. He is the author of Commie Cowboys: The Bourgeoisie and the Nation-State in the Western Genre.

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