A Global Tax Cartel Would Be as Bad as It Sounds

[Kamaji]

A Global Tax Cartel Would Be as Bad as It Sounds

Several studies have found that the vast majority of costs incurred by increased corporate taxes are passed along to workers in the form of lower wages.

VERONIQUE DE RUGY
5.12.2022

When all you have is a hammer, everything does indeed look like a nail. This is the best way to describe government officials' unoriginal and often destructive thinking. No matter the problem du jour, the answer is always more government spending. But more spending requires more tax revenue, which is not always easy to acquire in the modern global economy.

That's how we got the current effort by some United States officials to impose a global minimum tax. They are hammering away to extract more revenue from U.S.-based multinational corporations by limiting competition from countries with more welcoming tax systems.

In 2017, former President Donald Trump's administration improved the corporate tax system by lowering the top corporate income tax rate from 35 percent to 21 percent. At the same time, the worldwide tax system, under which income is taxed by a firm's home country no matter where it is earned, was replaced by a territorial tax regime. In this system, income is taxed only in the country where it is earned. For example, an American company earning income in France is taxed only in France, not in the U.S.

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Such skepticism is in order. First, economists at the Organization for International Cooperation and Development, who examined the effects of various types of taxes on the economic growth of developed nations, found corporate taxes "to be most harmful for growth, followed by personal income taxes, and then consumption taxes."

Second, while legal liability for these taxes is placed on corporations, several academic studies have found that the vast majority of the costs are passed along to workers in the form of lower wages.

Third, while the argument for raising more revenue is often presented as a tool of fiscal responsibility, the reality is quite different. Countless studies show that feeding the government beast with more corporate-tax revenue increases spending rather than reduces government budget deficits. And as my recent review of the literature with Mercatus Center economist Garett Jones reveals, more deficit spending will likely hinder economic growth.

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Source:  https://reason.com/2022/05/12/a-global-tax-cartel-would-be-as-bad-as-it-sounds/