It is shocking to see President Biden cutting with the Group of 20 wealthy countries a deal to raise taxes on American corporations without first getting a mandate from Congress. On the contrary, Mr. Biden has to be well aware that the sentiment for such a deal might well not even be there in Congress. Never mind. Mr. Biden seems to imagine that the Constitution granted the taxing power to the president — of, say, France.
Where is Learned Hand when we need him? He is gone now, but he was the United States Circuit Judge who declared that “Anyone may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.” He sided with the tax commissioner, as did the Nine, though the justices vouchsafed Judge Hand’s point.
So where does the Biden administration come off conspiring with the Europeans to make it difficult for American companies — they’re the target here — to seek protection in the principle that Learned Hand articulated? Mr. Biden and the G-7 want to defeat tax havens by setting a global minimum tax of at least 15% for corporations. This aim is to end what Secretary Yellen at Treasury keeps calling a “race to the bottom” on taxes.
Mrs. Yellen used that phrase again Saturday in characterizing the results of the betrayal at the G-20. She said the meeting was “further confirmation” that the “world is ready to end the global race to the bottom on corporate taxation, and there’s broad consensus about how to do it — with a global minimum tax of at least 15%.” Then again, too, of course the world is ready to raise taxes on American corporations.
The secretary argues that 131 nations representing “more than 90%” of the global economy “agree on this.” The world, she says, “should now move quickly to finalize the deal.” She also says the G-20 is working on “climate change,” which is another tax. This is not leadership. This is followership. Yet it’s not to “one hundred thirty-one nations” that the Constitution grants the power “to lay and collect taxes.”
No, that power is granted to the Congress. And not the congress of France, or Germany, or Japan or the rest of their ilk. The legislature that holds the power to tax Americans is the Congress of the United States. That would have been the right place for Mr. Biden and Mrs. Yellen to start if they want a mandate to raise taxes on American corporations. If they had a buy-in from Congress, going to the G-20 might be less askew of the Constitution.
As it is, the Biden-Yellen plan on taxes smacks of the same profound error President Obama (and Mr. Biden) made in seeking their articles of appeasement with the Iranians. We’ve often editorialized on this head. Knowing they could not get a mandate in Congress — appeasement was overwhelmingly opposed there — Messrs. Obama and Biden went to the United Nations and sought to outflank their own legislature back in Washington.
This is the feature about the G-20 that’s so shocking. The G-20 is not a treaty organization. It’s just a bunch of wealthier countries, plus the European Union. Including the EU means that each European member of the G-20 is represented against us twice. The one hope for leadership in Europe at the moment is that Hungary, Ireland, or Estonia might balk, blocking the unanimity that, according to the New York Times, the Europeans would need.
Which brings us back to Congress. Mrs. Yellen, according to the Times, is indicating that the Democrats could try to sneak this deal through via the reconciliation process. That suggests the votes aren’t there. The top Republican on Ways and Means, Kevin Brady, is quoted by the Times as predicting the G-20 scheme would advantage foreign companies over American ones and never pass. What an issue for the GOP to take to the voters in 2022.
Drawing by Elliott Banfield, courtesy of the artist.