Mike's Minute: We must keep an eye on the global tax debate

Author
Newstalk ZB,
Publish Date
Fri, 7 May 2021, 10:26AM

Mike's Minute: We must keep an eye on the global tax debate

Author
Newstalk ZB,
Publish Date
Fri, 7 May 2021, 10:26AM

Janet Yellen, who used to be the Federal Reserve Chair, and is now Joe Biden's Treasury Secretary, is busy again spruiking the idea that corporate tax needs a globally accepted minimum.

She calls it a "race to the bottom."

It's a clever line. That’s how politics generally gets traction, how you frame something is the key to success, or not.

A race to the bottom implies negativity; you don’t want a race to the bottom. The reason she's out selling this concept is that the President is looking to hike taxes to pay for his multi-trillion dollar plans around welfare, minimum wages, and infrastructure.

America already has a debt with so many zeros you lose count. They had another record trade deficit last month.

The good news is the economy is showing real signs of life and there is great prospect. But, tax is getting hiked for the so-called rich, 61 percent in some places for some people.

It's why they are leaving New York for Florida, and California for Texas. Democrats, left wingers, love to tax you.

Now, what Yellen needs to do is convince a bunch of other countries that what Biden is doing isn't going to make them look out of step. In other words, the risk is by taxing at the level they want to, America becomes uncompetitive. Because what we know is that if taxes are too high people bail, people do business where the tax isn't that high.

Our gap in business tax between New Zealand and Australia has to be watched. Our gap between the top tax rate and the business rate has to be watched given they're out of kilter.

It's why Ireland has prospered; they lowered their rate to 12.5 percent and said come on over, they did.

This is what Yellen is now arguing against.

But here is the critical point; tax isn't a race to the bottom. Because the line assumes tax is good, tax is not good.

It's robbery, it's taking money you earned under the auspices of community good. Most of us agree with that, but only to a point.

A race to the bottom is in fact exactly what we do want. Less tax is good, efficiency with other's money is good, and letting us keep more of what we earned is good.

What Yellen knows is low tax attracts talent and investment and produces growth and jobs.

But she can't say that, because Biden told her not to. So, they’ve dreamed up a bit of spin to argue in favour of a deluded and disastrous ideology.

The good news is I think most people will see it for what it is.