Opinion: Janet Yellen’s (Johnny) Cash problem
Johnny Cash has a lesson for Secretary Janet Yellen’s Treasury Department. In his classic rendition of Wayne Kemp’s “One Piece at a Time,” Cash describes how a worker on a Detroit assembly line put together a rather novel automobile by taking car parts from the factory over many years. If Secretary Yellen isn’t careful, a similar thing could happen to the U.S. tax base.
One of these tax hikes is a new global minimum tax, agreed to by OECD countries in 2021. Even though economists have warned of the anti-competitive consequences of this global minimum tax agreement, and Congress rejected such an approach last year, Yellen doubled down on her support of the tax in her testimony to the House Ways and Means Committee, saying that, in part, it will help fund the president’s budget.
First, the new global minimum tax rules take priority over the U.S.’s current rules for taxing the foreign profits of U.S. companies. One such rule, the tax on global intangible low-taxed income , was put in place during the 2017 tax reform to ensure U.S. foreign profits were sufficiently taxed even if firms paid low taxes abroad. The international tax agreement would supersede rules like this, and a slice of the current U.S. tax base would fall into the hands of foreign governments.
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