Commentary
Friedrich Hayek wrote “
The Road to Serfdom” while Nazism, under Hitler’s global designs, ravaged his native Austria.
“Our freedom of choice in a competitive society rests on the fact that, if one person refuses to satisfy our wishes, we can turn to another,” he noted in his classic work on the dangers of big government, be the regime democratic or otherwise, warning: “But if we face a monopolist we are at his absolute mercy. And an authority directing the whole economic system of the country would be the most powerful monopolist conceivable.”
The industrialized free world is poised to give away its citizens’ ability to turn to another country when one fails to satisfy their wishes in regard to taxation. The United States and other major nations are on the cusp of empowering a multi-national monopoly via a global minimum tax. It stands to reason that if “an authority directing the whole economic system of the country would be the most powerful monopolist conceivable,” an authority directing the tax systems of the national economies of most of the whole world is going to be infinitely more powerful—the ultimate monopoly.
U.S. Chief Justice John Marshall famously
declared that “the power to tax involves the power to destroy” and a global monopoly that leaves companies with no refuge from such destructive powers in the form of nations that offer lower tax rates will leave economic devastation in its wake, manifesting itself in the misery of protracted high unemployment across the industrialized world.
In November 2021, the United States and 136 other countries, under the auspices of the Organization for Economic Co-operation and Development, agreed to require (
pdf) a global minimum corporate tax rate of 15 percent, to take effect next year. Its purpose is
described as establishing control over tax competition on corporate profits, and once such a uniform restriction takes effect, it will only be a short time before that rate floor rises above 15 percent, and then keeps rising.
Thankfully, finalization hasn’t yet come for the OECD scheme, and the collapse of President Joe Biden’s $5 trillion Build Back Better legislation quickly made some European supporters grow
skittish.
Competition fuels innovation and productivity, whether it’s entrepreneurs and firms competing with each other or governments competing for companies’ investment dollars in the global marketplace. Consider how greatly consumers all over the world have benefited from Ireland’s longtime strategy of attracting foreign companies with lower taxes. The Irish Republic last fall
agreed to scrap the 12.5 percent corporate tax that rocketed its economy, with its young, educated, English-speaking workforce acting as a magnet for the world’s most high-growth foreign businesses for decades. Ireland will now fall in line with the 15 percent minimum in anticipation of the OECD requirement being set in motion–despite the opposition of a
large majority of Irish.
More than 800 U.S. companies, including Google, Apple, Facebook, Twitter, and Pfizer, took advantage of the low tax rate and rooted themselves in Ireland,
providing more than $20 billion per year in investments, goods, services, and wages as they employed about 180,000 Irish workers directly and another 144,000 indirectly. Cork in southern Ireland is the main European base for 24 of the world’s 25 largest pharmaceutical companies.
Hungary’s alluring 9 percent corporate tax has
energized its automotive and manufacturing sectors, powered growth, and generated a multitude of jobs for its population of 10 million. Hungary’s finance minister warns that a global minimum tax could negatively affect as many as 3,000 major companies in his country.
One wonders just what the politicians and bureaucrats behind the OECD’s “
co-ordinated solution to addressing the challenges raised by an increasingly digitalized and globalized economy” think happens to the wealth companies save from the taxman. Are they under the impression that those who have devoted their lives and fortunes to revolutionizing communications and medicine gleefully sit around counting their cash? Or squander it all on minks and Lamborghinis?
As George Gilder pointed out in one of the past century’s most important books, “
Wealth and Poverty,” an eloquent battle cry against the conventional wisdom that rules the minds of governmental elites the world over, “A successful economy depends on the proliferation of the rich, on creating a large class of risk-taking men who are willing to shun the easy channels of a comfortable life in order to create new enterprise, win huge profits, and invest them again.”
When a uniform floor of taxation causes there to be nowhere in the world left to go to optimize those profits–and then re-invest them to the benefit of billions across the globe seeking livelihoods for themselves and their families—our global overlords will not simply be obstructing the creativity and productivity of entrepreneurs and investors; they will be promoting economic atrophy and courting disaster for workers everywhere.
