Previously, I reviewed Kimberly Clausing’s recent book Open: The Progressive Case for Free Trade, Immigration, and Global Capital. She was recently appointed by the Biden administration to be Deputy Assistant Secretary of the Treasury for Tax Analysis. Yesterday, she testified before the Senate Committee on Finance. Her remarks highlight many of the points that she made in Open.
In particular, she notes how corporate tax revenue in the United States has fallen from 2% of GDP to 1% of GDP with the passage of the 2017 Tax Cuts and Jobs Act. In contrast, the average for industrialized countries (OECD) has been around 3% of GDP for the past two decades. She makes three primary points in her testimony.
- The U.S. needs to do a better job of defending its corporate tax base to inhibit company’s ability to have their earnings taxed in countries with low or no corporate income taxes.
- The international taxation of corporate income should establish a global minimum rate of taxation in order to discourage the hiding of income in tax havens such as Bermuda, the Caymans, Ireland, Luxembourg, the Netherlands, Singapore, and Switzerland.
- Given the changes over the last four decades in the globalization of capital, the U.S. treatment of capital needs to be reformed to reduce the biases that encourage the substitution of capital for labor.
The last point aligns well with what I argued in my most recent post regarding the taxation of capital in contrast with that of labor in the United States. It also aligns with the IRS report on untaxed income highlighted in a recent New York Times editorial. Thus, I strongly support Dr. Clausing’s argument and encourage Congress to adopt her recommendations.
No Con Economics 