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For most countries, trying to successfully tax multinational corporations in the age of global capital is like trying to fight a nuclear superpower’s army with a local militia: It’s a mismatch. Companies with armies of accountants and a relaxed metaphysical understanding of the concept of “location” can shop for international tax havens at their leisure, pitting countries against one another to the benefit of the private investment class. In the face of this status quo, the Biden administration’s new proposal for a global minimum corporate tax rate of 21% is a desperately needed tool for curbing our descent into irreversible inequality. And our current political moment may be just bizarre enough for it to actually come to pass.
Everyone thinks tax policy is one of the most complicated things in the world, but the truth is that a child could figure out the basics. Various countries around the world are tax havens. Tons of companies pull off legal trickeries that allow them to “locate” their “operations” there in order to minimize their taxes. Global corporations and their investors get richer. Governments lose billions of dollars. And the entire concept of democratic control of capitalism is undermined. If there were a single minimum tax rate that companies were forced to pay no matter what country they operated in, it would eliminate the incentive for this entire absurd accounting charade. It would also restore some credibility to the idea that governments should be allowed to tax and regulate economic activity, rather than having governments act as beggars in a world controlled by powerful corporations whose interests must be catered to in a global race to the bottom.
In 2017, the economist Gabriel Zucman estimated that the United States loses “close to $70 billion a year in tax revenue due to the shifting of corporate profits to tax havens,” which amounts to nearly a fifth of all corporate tax revenue. This is the global version of a company forcing multiple states to bid with lavish tax incentives in order to attract a new factory or headquarters. The state (or country) willing to give away the most — to allow the maximum amount of power and money to be retained in private hands — ”wins” the business, but the public, in aggregate, loses. If Treasury Secretary Janet Yellen’s proposal to set a 21% minimum rate in more than 100 countries comes to pass, it will end the tax haven-shopping, to the benefit of governments everywhere. Corporations, which are algorithms designed to maximize profit, will surely fight it. But if it’s enacted, they will get a benefit too: the ability to make global business decisions for rational business reasons, rather than for the purpose of seeking the lowest tax rate in a worldwide scavenger hunt. I’m sure the Cayman Islands are nice and all, but I bet that all those global corporations have business to do in bigger countries, too.
This sort of coordinated global government action against the power of capital occupies an interesting political space. It is either a foolish and threatening utopian socialist dream, or an utterly practical necessity, depending on your perspective. Even the most hardened pro-business legislators have an interest in seeing something like this tax enacted, because its most important purpose is simply to restore some of the balance of power between government and private capital. The only thing that Republicans hate more than the dirty socialists who want to regulate business is business so powerful that it has no need to listen to politicians — including Republicans.
In fact, the ongoing fad of Republicans adopting faux-populist personas in order to punish companies for being “woke” could serve to make them more receptive to this sort of global taxation. (It should go without saying that everything about this dynamic, from the predatory mega-corporations posing as social justice advocates to the craven business-funded Republicans acting as though some sort of concern for regular people compels them to object to anodyne statements from those corporations, is utterly hypocritical. Still, this hypocrisy could be weaponized for a noble goal.) Just this week, Senate Minority Leader Mitch McConnell threatened “serious consequences” for the companies that have dared to be “woke,” a term that apparently means “issuing a public statement saying that voting is good and racism is bad.” I can think of no more serious consequence than a global minimum corporate tax rate. Line up in support, Republicans! This’ll teach em!
It is truly bizarre that the same strain of right wingers who have been inaccurately branded as “populist” are also the ones who most strenuously decry “globalism.” Globalism is a fact — not of government, but of money. Corporations and investors operate globally, with little regard for national borders. By contrast, labor and governments are tightly constrained by borders. Increasing global cooperation of governments and loosening immigration restrictions will serve the interests of humans, at the expense of the interests of capital. This is a good thing. If words meant anything, “populists” would strongly favor coordinated global taxation and the free movement of labor. Instead, the “populists” favor absolute freedom for money, and guns pointed in the face of humans trying to earn a living.
We’ll see how woke all of these companies are when it comes time to ask them how they feel about having their international tax havens shut down. I can only assume they will all be excited for the chance to patriotically contribute their fair share to the public.
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Hamilton Nolan is a labor writer for In These Times. He has spent the past decade writing about labor and politics for Gawker, Splinter, The Guardian, and elsewhere. You can reach him at Hamilton@InTheseTimes.com.