Leftist Governments (and the IMF) Pushing Global Wealth Tax

April 24, 2024 by Dan Mitchell @ International Liberty

When Joe Biden began his push for a global corporate tax cartel back in 2021, I explained why the idea was very bad news for the world’s workers, consumers, and shareholders.

 

And I pointed out it was specifically bad news for developing nations since they would be prevented from using good tax policy to encourage rapid growth.

Most important, at least for purposes of today’s column, I also told the BBC that a corporate tax cartel would be very dangerous since politicians would quickly try to apply the same approach to other types of taxes.

Well, I was right.

As reported in Barron‘s, some of the world’s greediest governments are now pushing a global wealth tax cartel. Here are some excerpts from the story by Daniel Avis.

Brazil, which is chairing the G20 this year, has been pushing for the group of nations which together account for 80 percent of the world’s economy to adopt a shared stance…

“Fair international taxation is not just a topic of choice for progressive economists, but a key concern at the very heart of macroeconomic management today,” Brazilian finance minister Fernando Haddad said during an IMF event in Washington. “Without international cooperation, there is a limit to what states can do, both rich and developing ones,” he added.

…Sitting alongside Haddad at the IMF event, French finance minister Bruno Le Maire renewed his calls for a global minimum tax… “The future of the world cannot be a race to the bottom,” Le Maire said.

Haddad seems like a not-very-good person. He’s been a political science professor, according to Wikipedia, and he’s authored some publications that suggest he’s a leftist ideologue.

• In Defense of Socialism
• Theses on Karl Marx
• Work and Language for the Renewal of Socialism

This crank is now trying to set tax policy for the entire world!

Marcela Ayres and Andrea Shalal of Reuters also reported on Haddad’s iniiative, and their article noted the predictably pernicious role of the International Monetary Fund.

Brazil’s proposal to tax the super-rich globally gained momentum among Group of Twenty members…with France’s finance minister and the head of the International Monetary Fund backing a coordinated push to generate new revenue… IMF chief Kristalina Georgieva said…ensuring that the richest paid their fair share would mobilize funds… She said IMF research…also estimated that setting a minimum floor for carbon pricing could boost revenue by $1.4 trillion a year. …Gabriel Zucman, director of the European Tax Observatory, …has proposed that very-high-net-worth individuals…pay at least the equivalent of 2% of their wealth in income tax each year. That would generate $250 billion per year.

I can’t resist pointing out that Ms. Georgieva (like all IMF bureaucrats) gets a very lavish salary that is exempt from taxation. Yet this hypocritical parasite agitates for higher taxes on everyone else.

Fortunately, at least one major government is skeptical of this money grab.

In a separate report from Reuters, Christian Kraemer and Maria Martinez note that Germany’s Finance Minister is not a fan.

German Finance Minister Christian Lindner rejected on Thursday Brazil’s proposal to tax the super-rich, indicating a challenging path for it to gain widespread G20 support. …Speaking after meeting U.S. Senator Bernie Sanders on Thursday, Brazil’s Finance Minister Fernando Haddad said of Lindner’s opposition to the proposal: “He will change (his mind).” Sanders said he “strongly” supports the proposal… But the Brazilian government is aware that other countries like Japan and Italy have shown resistance to the initiative, added the source. …Le Maire said that moving to tax the rich was the logical next step for a series of global taxation reforms launched in 2017, including agreement on a global corporate minimum tax.

Let’s hope Germany holds firm, and that Japan and Italy also are on the right side.

But I worry because the statist countries will be relentless.

Remember, the corporate tax cartel seemed crazy when it was first proposed about 10 years ago. But the left kept pushing and now it’s in the process of being implemented.

I worry the same thing will now happen with a global wealth tax cartel.

P.S. The corporate tax cartel seemed crazy because it is crazy (assuming one wants more prosperity)

P.P.S. It was nice of Monsieur Le Maire to confirm what I told the BBC about the corporate tax cartel being the first step on the path to other tax cartels.

P.P.P.S. I have not bothered to make the economic case against the wealth tax in this column, but feel free to click here, here, here, and here for that type of analysis.

The Tax-Cartel Crowd Now Wants a Global Wealth Tax

March 1, 2024 by Dan Mitchell

When I give speeches about the global fight between tax competition and tax harmonization, especially when speaking in jurisdictions with good tax policy, I usually point out that that compromise is a bad idea. To be sure, politicians from high-tax nations can put a lot of pressure on low-tax jurisdictions.

Especially the threat of financial protectionism. 

But I explain that capitulation is a no-win strategy.

That’s because any victory for the left will simply set the stage for future demands. My usual analogy is that you don’t turn an alligator into a vegetarian by feeding him your arm. All that happens is that he then gets hungry for his next meal and brings a friend. 

That’s what happened when the Paris-based OECD launched its initial attack on tax competition.

So-called tax havens were told that they needed to be deputy tax collectors for high-tax nations, but this would only involve complying with occasional requests for information about specific taxpayers suspected of evasion. Low-tax jurisdictions agreed, but then the OECD moved the goal posts. And when the dust settled, we wound up with a global system of automatic sharing of personal financial information – including even nations like Russia and China.

And since politicians are now less worried about flight capital, they are raising tax rates. Now the same thing – moving goal posts – is happening in the field of global minimum taxes. Politicians from uncompetitive nations have been pushing to harmonize corporate taxes, including a global minimum rate of 15 percent. The ink isn’t even dry on that scheme, yet the pro-tax crowd is already agitating for its next meal.

Here are some excerpts from an article by Richard Partington for the U.K.-based Guardian.

The G20 group of the world’s most powerful countries is exploring plans for a global minimum tax… Leaders gathering in São Paulo for a key G20 meeting of finance ministers and central bank governors are preparing to discuss an internationally agreed backstop… Aiming to build on the cooperation that resulted in a 15% global minimum tax on multinational companies, which came into effect in January, the plan is being promoted under Brazil’s presidency of the G20… Brazil’s finance minister, Fernando Haddad, under the leftwing government of the president, Luiz Inácio Lula da Silva, is pushing for the adoption of the policy. France’s finance minister, Bruno Le Maire, also gave his backing this week, saying Europe should take it forward. …Zucman said the G20 talks would mark “the beginning of a conversation”. Various details would need to be hammered out between countries.

This sounds crazy. And it is crazy.

Wealth taxes arguably are the most destructive way for governments to grab revenue. Yet some politicians, motivated by greed and class warfare, want to make that tax universal. I hope this idea gets shot down, but keep in mind that even semi-rational politicians are going to be susceptible to bad proposals because so many nations are facing massive long-run fiscal problems.

P.S. Readers who want to learn why tax competition is a good idea should click here, here, and here.

P.P.S. This issue is personal to me for reasons you will understand if you read this, this, and this.

Winners and Losers from a Global Tax Cartel

July 14, 2021 by Dan Mitchell @ International Liberty

I critiqued Biden’s proposal for a global corporate tax cartel as part of a recent discussion with South Africa’s Free Market Foundation.  Here’s the segment where I explain why it would be bad for developing nations.

At the risk of stating the obvious, Joe Biden is pushing this policy because he wants more tax revenue to fund his misguided plan for a bigger welfare state in the United States. And the same is true for politicians in other big nations such as France, Japan, and Germany. 

So as negotiations continue and rules are decided, rest assured that those countries will look after themselves and politicians from developing nations will be lucky to get a few crumbs from the table.  This discussion gives me a good excuse to put together this list of the potential winners and losers from a global tax cartel.

Since I slapped this together in five minutes, I won’t pretend it’s comprehensive.  But it’s hopefully more complete than a simple statement that politicians are the winners and people in the private sector are the losers.

Speaking of losers, my list includes “Nations with sensible tax policy,” and that’s a good reason to share this story from the New York Times. It’s about Janet Yellen’s efforts to convince Irish politicians to sacrifice their nation’s economic advantage.

The United States is hopeful that Ireland will drop its resistance to joining the global tax agreement… The agreement, which gained the support of the Group of 20 nations on Saturday, would usher in a global minimum tax of at least 15 percent. It would also change how taxing rights were allocated, allowing countries to collect levies from large, profitable multinational firms based on where their goods and services were sold. …Ms. Yellen held high-stakes meetings in Brussels this week with Paschal Donohoe, Ireland’s finance minister… She needs Mr. Donohoe’s support because the European Union requires unanimity among its members to formally join the deal.

So you may be wondering what Ms. Yellen said? Did she have some clever and insightful argument of how Ireland would benefit (or at least not be hurt) if politicians create a global tax cartel?

Nope. The best she could come up with is that Ireland’s tax system wouldn’t be as bad as the one she wants for the United States.

Ms. Yellen told her Irish counterpart that Ireland’s economic model would not be upended if it increased its tax rate from 12.5 percent…it would still have a large gap between its rate and the 21 percent tax rate on foreign earnings that the Biden administration has proposed.

And her weak argument is even weaker when you consider that she’s already pushing for a much-higher minimum tax.

The bottom line is that Ireland has reaped enormous benefits from its decision to enact a low corporate tax rate. But if a global tax cartel is imposed, it would simply be a matter of time before that country gets relegated to being an economic backwater on the periphery of Europe.

P.S. Part of the discussion in the video was about developing nations having the right to copy the economic model (no income tax and no welfare state) that enabled North American and Western Europe to become rich in the 1800s. Sadly, I don’t think many politicians in the developing world are interested in that approach nowadays, but rich nations shouldn’t make it impossible.

Biden’s Global Tax Cartel: Bad News for Workers and Consumers

June 6, 2021 by Dan Mitchell  @ International Liberty  

Biden’s tax agenda – especially the proposed increase in the corporate rate – would be very bad for American competitiveness. We know this is true because the Administration wants to violate the sovereignty of other nations with a scheme that would require all nations to impose a minimum corporate tax rate of 15 percent.  Indeed, the White House openly says it wants to export bad policy to other nations so that foreign corporations aren’t advantaged and foreign countries can’t try to get a competitive edge.”

“

Other big nations (the infamous G-7) just announced they want to participate in the proposed tax cartel.  I was just interviewed on this topic by the BBC World Service and I’ve extracted my most important quotes.  But I encourage you to listen to the full discussion, which starts with (predictably awful) comments from the French Finance Minister, followed by a couple of minutes of my sage observations.

(Editor's Note:  At this point in the article there's a radio interview I can't reproduce. Please follow the link to the original article.  RK)

For what it’s worth, “reprehensible” doesn’t begin to capture my disdain for what the politicians are trying to achieve.

What’s particularly irritating is that politicians want us to think that companies are engaging in rogue tax avoidance. Yet, as I noted in the interview, national governments already have the ability to reject overly aggressive forms of tax planning by multinational firms.

Here’s some of what was reported about the proposed cartel by the Associated Press.

The Group of Seven wealthy democracies agreed Saturday to support a global minimum corporate tax of at least 15%… U.S. Treasury Secretary Janet Yellen said the agreement “provides tremendous momentum” for reaching a global deal that “would end the race-to-the-bottom in corporate taxation…” The endorsement from the G-7 could help build momentum for a deal in wider talks among more than 135 countries being held in Paris as well as a Group of 20 finance ministers meeting in Venice in July. …The Group of 7 is an informal forum among Canada, France, Germany, Italy, Japan, the UK and the United States. European Union representatives also attend. Its decisions are not legally binding, but leaders can use the forum to exert political influence.

As you just read, the battle is not lost. Hopefully, the jurisdictions with good corporate tax policy (Ireland, Bermuda, Hong Kong, Cayman Islands, Switzerland, etc) will resist pressure and thus cripple Biden’s cartel.

 

I’ll close by emphasizing that the world needs tax competition as a necessary check on the greed of politicians.   Without any sort of constraint, elected officials will over-tax and over-spend.  Which is why they’re trying to impose a tax cartel. They don’t want any limits on their ability to buy votes with other people’s money.  And we can see from Greece what then happens.

P.S. The Trump Administration also was awful on the issue of tax competition.

P.P.S. Here’s my most-recent column about the so-called “race to the bottom.”

P.P.P.S. As noted in the interview, both the IMF and OECD have research showing the destructive impact of higher corporate tax burdens.

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Nigel Farage Has a Message for the Democratic Party in America

Editorial of The New York Sun | May 26, 2021

The heads-up this week to American Democrats from Nigel Farage strikes us as more newsworthy than its coverage so far would suggest. He’s warning that left-wing hostility to Israel could deliver to Democrats the kind of political catastrophe that befell Labor in Britain in December 2019. That’s when voters, reacting in part to Labor’s hostility to the Jewish state, gave Conservatives such a victory that Jeremy Corbyn was forced to resign.

On a visit here, Mr. Farage, a founding father of the Brexit movement, issued his warning in an interview Monday with Fox News’ Maria Bartiromo. He reckoned that Mr. Corbyn’s taking the Labor Party “in the pro-Palestinian, anti-Israel but clearly also anti-Semitic direction” had prompted voters in “Middle England” to say “‘we don’t like this kind of extremism,’ and it did hurt the Labor Party.”

“I think,” Mr Farage also said, “there are many instances here in the USA of members of Congress who are supporting these Palestinian protests.” He scored the Democrats for failing to condemn attacks on Jews “in strong enough terms.” He suggested that “across the western world” the left has “openly supported a Palestinian cause that behaves more like a terrorist organization,” and “decent people don’t like this sort of thing.”.........To Read More.......