In sports to a large degree a coach is only as good as their players. Politics is similar. Joe Biden is the new “coach” and he has assembled some great talent around him. His Treasury Secretary is Janet Yellen. While the former guy had a Wall Street C-lister with a trophy wife at Treasury; Biden has one of the world’s best economists. Saturday the difference showed and it was the beginning of a win for America.
Saturday the G-7 conference closed with the announcement of an agreement in principle to institute a global minimum income tax of 15%. Nothing is final and the details need to be worked out but Canada, France, Germany, Italy, Japan, the UK and the United States are all on board. You can add Spain to the list; while not a member of the G-7 they immediately signed on. The idea is to end the international race to the bottom on taxation. While this is only eight countries at this writing (and certain to increase – the G-20 meets in July) can you envision being an international corporate giant and closing yourself to those eight markets?
The idea was Yellen’s as she publically expressed a few weeks ago and she was the driving force behind the agreement. It may not be as sexy as flying a government plane to Fort Knox to view an eclipse with your spouse but it will help fund needed government projects in America and around the globe. Remember, for example, that climate change is a global issue and America is not the only country with infrastructure challenges.
Where is the money coming from is always the cry of the Republican Party (except for when they spend via the tax code)? They are wrong on both counts. The challenge is not to raise taxes on the working and middle classes; it is to get the wealthy to pay their fair share! Plugging loopholes and investing in enforcement is the road to that goal.
The rule of thumb is that for every dollar spent on IRS enforcement six dollars of revenue flows into the Treasury Department. I know my management degree is somewhat outdated but that sounds like a pretty good return on investment to me. The IRS simply lacks the needed “sophisticated cops” to audit large and complex entities and the wealthy individuals who own them. It doesn’t take the most skilled forensic accountant in the world to audit a mom and pop or a working class individual. The problem is that if they failed to pay their total tax bill the difference is relatively small. When challenged they will most likely either write a check or enroll in a payment plan. It is the equivalent of getting a small time criminal (or in some tragic but all too frequent cases innocent individual) to take a plea deal. Looks good on the resume of an ADA but is justice really done?
It takes a huge skilled team of accountants and lawyers to go after a multi-national corporation which will drag out appeals but in the long run the payday for the taxpayers will be huge. Perhaps most importantly it will show that the “party” is over and that “door” is closed. The average America wins!
Taking this a step further I’d like to reflect on Senator Elizabeth Warren’s idea of a wealth tax. This is another of the things I’m in favor of in principle but the implementation is the part that baffles me. Most middle class and many working class American couples own a house. (A few owns more than one.) They probably own two automobiles. (Again, a few more than two.) Most often their primary source of income is a paycheck which has withholdings taken out of it before it ever hits their hand or checking account. All of that is in their name(s) and easy to trace. Their opportunity to cheat on taxes is somewhere between extremely limited and non-existent.
Now we come to the super wealthy. Their sources of income are varied, often have tax advantages over wages (i.e. carried interest) and are much opaquer. Accumulated (most often inherited not earned) wealth is effectively hidden in a web of shell corporations. It is much more challenging to audit them. However this becomes an investment/reward decision. If an IRS agent “nails” John Q. Public the Treasury gets maybe four figures; Daddy Warbucks gets nailed and the bounty can easily be in the seven or more figures ranges.
While the global minimum income tax is far from a panacea for the Warren Plan it is the beginning of a lot of groundwork and a huge leap forward toward the feasibility of implementation.
Just to further differentiate the good guys and gals from the bad ones here are the fifteen Senators (not surprisingly all Republicans) who voted against the confirmation of Yellen: John Barrasso of Wyoming, Marsha Blackburn of Tennessee, John Boozman and Tom Cotton of Arkansas, Kevin Cramer and John Hoeven of North Dakota, Ted Cruz of Texas, Josh Hawley of Missouri, Mike Lee of Utah, Rand Paul of Kentucky, James Risch of Idaho, Rick Scott of Florida, Richard Shelby and Tommy Tuberville of Alabama along with Dan Sullivan of Alaska.
Maybe it’s just me but I don’t think any of them are in Yellen’s class!
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