Janet Yellen Gonna Eat Rich With Nice Chianti By Taxing Corps 28% Which Is 3 Points Higher Than 25%
Treasury Secretary Janet Yellen wrote an op-ed for the Wall Street Journal in her native language, Econ Geek, to argue for raising corporate income taxes a bit as part of Joe Biden's big infrastructure bill, the American Jobs Plan, which is going to job the shit out of you.
Yellen does this even though Joe Manchin has already said that corporate taxes should not be less than 25 percent, but also should not be more than 25 percent, and 28 percent is more than 25 percent and did she NOT HEAR HIM THE FIRST TIME?
In the piece, Yellen explains why the 2017 Big Fat Tax Cut For Rich Fuckwads has done a number on US tax revenues, and why that's actually not even a very good thing for corporations. Sure, it was fun to get all drunk on the lower corporate tax rate, but those tax cuts didn't deliver the goods to the economy that were promised by proponents.
Lower rates, the argument went, would lure production and investment to our shores, but that hasn't happened—and for an obvious reason: Other countries see what we're doing and respond. When they see us lower our rates, they lower theirs to undercut us. In the end, no nation ends up more competitive. The result is a global race to the bottom: Who can lower their corporate rate further and faster?
Because we love our readers, we won't go into the geeky details, except to say that the upshot of some badly designed parts of the 2017 tax law ended up encouraging American corporations to hide their profits overseas instead of returning that capital to the USA as proponents of the tax cuts had predicted. That's bad, because whatever little tax revenue those profits generate goes to Not America. Also, "global race to the bottom" is not a fun kinky consensual sex game.
The result of that global tax-cutting competition, Yellen points out, is that all countries lose out. While shareholders may get a nice payout, it's ultimately bad for corporations too, since reduced tax revenue means those companies will be hurt by shitty infrastructure, and oh, look, that's exactly what the USA has now:
Our tax revenues are already at their lowest level in generations, and as they continue to drop, the country will have less money to invest in airports, roads, bridges, broadband, job training, and research and development.
Funding for these public goods has been declining for four decades. The quality of American infrastructure now ranks 13th in the world. The effect on the competitiveness of U.S. businesses is enormous: The American Society of Civil Engineers projects that over the next two decades deficient infrastructure will cost American exporters $2.4 trillion. (That says nothing of what deficient R&D or education will cost them.)
And that has a cost for Americans in general, because by "choosing to compete on taxes, we've neglected to compete on the skill of our workers and the strength of our infrastructure." The hell with that malarkey, says Joe Biden, who thinks it would be a lot better for the US to
compete on our ability to produce talented workers, cutting-edge research and state-of-the-art infrastructure — not on whether we can have lower tax rates than Bermuda or Switzerland.
And that's where Team Biden's "Made in America Tax Plan" comes in, Yellen says. It eliminates or modifies features of the 2017 tax cut law that have given companies an incentive to move jobs and profits out of America, and instead "tilts the scales in favor of companies that invest in the U.S." Corporations will no longer be rewarded for moving their profits all over the world, at least not by the US.
And let's once again quietly applaud the smart branding of the Biden team's initiatives here: "Made in America Tax Plan" fits nicely into the administration's already familiar naming convention, hitting similar good-for-the-people notes as the "American Rescue Plan" and the "American Jobs Plan."
As for that global race to the bottom that's led to countries trying to attract corporations by seeing who can cut their own fiscal throats most deeply, Yellen says it's time for the US to lead the way to ending that, too:
Destructive tax competition will only end when enough major economies stop undercutting one another and agree to a global minimum tax. Through the Organization for Economic Cooperation and Development, we have been engaged in productive negotiations to achieve this, and the new tax proposal also includes some powerful incentives for other nations to sign on. For instance, the plan penalizes foreign multinationals operating in America that try to shift profits to tax havens.
Yr Wonkette is no economist, but we'd assume most countries would rather have an international agreement setting a floor for tax rates, instead of continuing to choke off their own revenue streams in hopes of luring corporations. Also, isn't it nice to be part of the international community again?
The revenue from the higher tax rates would go into infrastructure and jobs here in America, and that too would be good for business, Yellen points out, by funding
both traditional infrastructure (roads, bridges, ports) and the more modern kind needed to run a digital economy (high-speed broadband networks and a clean energy grid). According to Moody's, by 2024 these investments will add an extra 1.6% to GDP, which equates to roughly $400 billion.
What we like about all this is that Yellen keeps emphasizing, a bit like George Bailey in that charming Christmas depression and anxiety movie, that corporations will get a lot out of this, too, because they'll benefit from the better infrastructure and more capable, educated workforce that'll result from a slightly higher tax rate. And if the OECD countries agree on an international minimum standard for corporate taxes, there'll be little incentive for companies to go tax-rate shopping elsewhere. (It occurs to us that's a bit analogous to a minimum wage hike: Where everyone has the same basic costs, there's no competitive disadvantage in paying a decent wage, or paying taxes.)
Also, we're impressed by what Team Biden is doing with its communication strategy here. Emphasizing the common benefits of what tax revenues pay for may make some folks more receptive to the plan, because isn't this good for companies too? It's pretty much the same idea as when Barack Obama pointed out that government is a necessary component of corporate success, but it's made without handing opponents the rhetorical cudgel Obama's "you didn't build that" line did.
Is our presidents learning to Luntz things up without doing it for evil purposes?
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