By Ron Knecht



Janet Yellen, U.S. Treasury Secretary and former Chairwoman of the Federal Reserve System, has been a Democrat bureaucrat so long she’s forgotten or mixed-up the economic fundamentals she should have taught previously as a professor.

Finance ministers from the Group of 20 major economies recently endorsed a global minimum corporate tax rate of 15 percent.  

She claimed the measure will let countries compete on economic fundamentals, not income-tax rates.  Apparently, she forgets that corporate tax rates are among the most important economic fundamentals.

Let’s remind her and other progressives, statist liberals, etc. that businesses make their location and investment decisions based on a number of factors, only one of which is corporate tax rates.  

Their decisions are based on balancing factors such as distances to resources, suppliers and markets, labor quality and costs, reasonableness of regulation, infrastructure facilities, tax rates and commodity costs.

All these factors are important to maximizing the quality and minimizing the cost of the goods and services they deliver to their customers.  Maximizing quality and minimizing cost to those consumers are what market competition does and what the public interest requires.

So, increasing costs and distorting location and investment decisions by raising taxes that are already too high are contrary to the consumer and public interests.

What businesses don’t do is, as she alleges, simply ask what jurisdiction offers the lowest tax rate.

Moreover, nations’ overall tax rates, which include corporate taxes, are fundamental economic factors that tell how well policy and the economy are functioning in a country.  Almost all nations’ overall tax rates have long been higher than levels that promote the public interest by maximizing economic growth and thus human wellbeing and fairness.  Hence, having nations compete on tax rates is inherently a good thing.

Yellen repeats a standard liberal falsehood: that making countries compete on taxes (and regulation) creates a “race to the bottom.”  With public spending, taxing and regulation being sub-optimally high, giving politicians proper incentives to lower them actually creates a race to the top.

The race-to-the-bottom trope is a classic leftist lie in which they cynically use words to mean the opposite of what the facts show.  Like “equity,” “systemic racism” and “social justice.”

Instead of focusing on the balance that improves policy and an economy, leftists and their mainstream media focus only on the good side of what public spending can do, while completely ignoring the much greater damage the requisite taxes do to people and the public interest.

Thus, in presenting this story, Associated Press (AP, which has gone completely left-wing) whines that finding optimal public spending and tax rates will somehow short infrastructure, clean energy and education.  The U.S. and other nations already inordinately subsidize all three of these categories and get poor results from them in return.

So, taxing corporations and thus the customers, workers and investors to whom corporations will necessarily pass on the burden in order to throw more money at these public-sector favorites and others is a mistake.

In colluding to raise taxes around the world, these large predatory nations are doing what they claim in anti-trust law big corporations do.  

They are engaging in a conspiracy in restraint of free trade to the detriment of everyday people (consumers), the public interest, and efficient entrepreneurs seeking to enter markets.

They are proving the analyses show real economic damage is the product of public-sector intervention, not private-sector market freedom.

AP and these progressives and statists anguish at great length about accounting techniques large international corporations use to shift revenues and costs among countries to lower tax payments.  The excess taxes already levied by the U.S. and other nations are the cause of such gambits. 

Moreover, it is specifically the rules set by large nations to allow such legerdemain that favors the megafirm international crony capitalists over more entrepreneurial and efficient small ventures.

Thus, I carry no brief in all this for the Amazons, Googles (Alphabet), Microsofts, Teslas, per se.  My advocacy for keeping them from being over-taxed is made on behalf of their customers, potential small competitors, and the public interest in economic growth and fairness.

Also, to end the endless growth of the public sector relative to national and world economies.

Ron Knecht is a Senior Policy Fellow at the Nevada Policy Research Institute.  Previously, he served Nevadans as State Controller, a higher Education Regent, Senior Economist, college teacher and Assemblyman.  Contact him at RonKnecht@aol.com.