In June of 2021, 130 countries voted in favor of the minimum global corporate tax of 15%, which would require corporations based in every participating country to pay a 15% tax on all earnings. While this proposal was deemed controversial by some, the benefits of the plan extend worldwide. U.S. Secretary of the Treasury Janet Yellen claimed that current corporate taxes are “depriving economies of the revenue they really need to invest in infrastructure, education, research and development” and that the United States is not exempt from that deprivation. Participating in a global corporate income tax would be beneficial to the U.S. not only by supporting the global economy, but also by spurring innovation.
In May of 2021, the United States first proposed the 15% global minimum corporate tax, but this concept was not new for the U.S. President Joe Biden had always planned on taxing the highest earners in the U.S. in order to raise $1.5 trillion within the next decade, and the implementation of a global corporate tax would assist in obtaining those funds. By disincentivizing companies from moving abroad due to lower taxes, companies will stay in the U.S. Because these companies will be paying U.S. taxes, their contributions will raise government revenue.
The global corporate tax would thus assist in funding President Biden’s infrastructure bill. A large investment into infrastructure would boost the U.S. economy as well as increase the U.S. job market; President Biden says that this would be “the largest American job investment since World War II.” Participation in the global corporate tax increases revenue for the United States, directly funding President Biden’s infrastructure bill and creating an influx of jobs. Officials have predicted that the spending in the bill would return federal investment in areas of infrastructure and research to a level not seen since the 1960s. The Brookings Institute found that infrastructure jobs account for 11% of the nation’s workforce, and that “infrastructure is the backbone of a healthy economy.” The global corporate tax would boost the U.S. economy, which is a shared interest for all parties involved.
These benefits are not exclusive to the U.S. The 130 countries that support the 15% global minimum corporate tax make up over 90% of global GDP. This widespread support from other countries allows the plan to be more viable and can lead to more agreements between the U.S. and these other participating countries. Secretary Yellen argues that the global minimum tax rate will reduce competitive incentives to relocate amongst companies and create global stability. This stability will allow other countries to raise revenue that they could use for infrastructure and public goods. Many countries have already demonstrated their support for this tax, bringing its establishment closer to reality.
This solution is a response to a serious global problem. According to the Organization for Economic Co-Operation and Development, multinational companies have “deprived countries of $100 billion to $240 billion each year” due to differences in tax systems across the globe. This is detrimental because these larger companies are not paying what they should be to support the governments of those countries, which also results in a loss of revenue that could go towards humanitarian efforts. Yellen refers to this as a global “race to the bottom.” It is important to regulate this race to the bottom because those larger corporations are not contributing the same to their respective countries as citizens are.
The proposed 15% global minimum corporate tax goes into effect in 2023, and within that time, the member countries will be meeting to discuss its implementation. While some aspects of the tax are controversial, the national and global benefits are evident. Under current tax policies, many corporations are able to avoid paying their fair share, which is causing a lack of funding for governments. In order to improve the U.S. economy as well as enhance global stability, participating in a global corporate tax would be the best choice for the United States.