In the classic 1939 film, The Roaring Twenties, a desperate James Cagney tells Priscilla Lane, “You want the Brooklyn Bridge, all you gotta do is ask for it. If I can’t buy it, I’ll steal it.” Like a desperate lovesick puppy trying to force the object of his affection to fall in love with him, President Joe Biden has promised the American people the Brooklyn Bridge, relying on an elixir of higher taxes to carry out his plans. But suppose he fails to satisfy the two-thirds of Americans who endorse his spending plans. In that case, these folks might fall in love with the potential 2024 Republican presidential candidate who can deliver the goods of prosperity and growth. Biden might try everything under the sun to woo his crush and make sure he showers the love of his life with diamonds and pearls, even if it means appealing to the worst instincts of the globalists: confiscation.
4D Chess: Global Minimum Tax
Recently, Treasury Secretary Janet Yellen unveiled a new proposal to implement a global minimum tax on corporations to prevent these vast businesses from shopping around for the lowest rate. This would be in addition to raising the corporate tax rate to 28%. Because much of Biden’s spending plans depend on fleecing more from the private sector, corporations fleeing the United States for greener pastures would forge a significant gap in his big-government scheme. But a key White House economic adviser thinks a compromise would be sufficient enough to generate enough revenues.
Speaking in an interview with Fox News Sunday, Council of Economic Advisers Chair Cecilia Rouse advanced a global minimum tax to counteract the proposed hike. She contended that the concept is to make certain America’s biggest companies are paying their fair sure and to sew up some of the loopholes to prevent greater financial offshore allocation. Ultimately, according to Rouse, it is about ending the race to the bottom on corporate taxes, a public policy embraced by the likes of Ireland and Luxembourg.
She told the network:
“President Biden is really saying, ‘Look, everybody should pay their fair share.’ Yes, internationally we don’t want to be disadvantaged, so he’s also working with other countries so that we have a minimum tax internationally so there’s not a race to the bottom.
“What we’ve seen over the past several decades is that the wealthiest Americans, the big corporations are getting wealthier, and they’re contributing less in terms of federal revenue.”
Corporations have warned that reversing former President Donald Trump’s measure would hurt America’s competitiveness and slow wage growth. But would these multinational juggernauts be content with a compromise of suspending a tax increase in exchange for a global minimum rate?
A Case of Murder—or Suicide?
Politicians regurgitate the concept that corporations and the wealthiest of Americans need to start paying their fair share. Corporations and affluent households get away with a lower tax bill because they exploit the innumerable loopholes in the federal code, something that legendary economist Ludwig von Mises was clear about: “Capitalism breathes through loopholes.”
That said, whether it is Big Business or private individuals, the top 10% already cover about two-thirds of the nation’s tab, and the top 1% pays about 40% of taxes.
But whatever the dollars and cents are, it is clear that raising corporate penalties makes investment more expensive. When this happens, it stifles a plethora of opportunities, such as investing in new business equipment or growing wages, which are tied together. Mises wrote in The Anti-Capitalistic Mentality:
“As the employer consequently will be in a position to obtain from the consumers more for what the employee has produced in one hour of work, he is able—and, by the competition of other employers, forced—to pay a higher price for the man’s work.”
Tax the rich may be great bumper-sticker economics, but this progressive nostrum is devoid of reality.
Uncle Sam Is Loaded
The U.S. government does not suffer from a revenue problem. Washington collects approximately $4.5 trillion in income and payroll taxes per year. Even during the coronavirus pandemic, the nation’s capital confiscated about $3.5 trillion from the American people. Suffice it to say, Uncle Sam is loaded. The real issue in the United States is that the government suffers from a pathological spending addiction. Politicians and bureaucrats will rarely concede this fact since it would make their positions unjustifiable. Biden argues that not adding trillions to the already bloated multi-trillion-dollar budget will hurt the nation’s finances—if that makes any sense. If this is public policymaking labeled as visionary and brilliant, the country is doomed. What more could fiscal conservatives expect when the president reversed $26 billion in spending cuts out of fear this would hurt the nation?
America’s hard left turn in 2020 may end up diving off the fiscal cliff. How appropriate for a president straight out of Looney Tunes.