Brian Lehrer: It's The Brian Lehrer Show on WNYC. Good morning again, everyone. We will talk now about an intriguing part of the Biden plan to make corporations pay their fair share of taxes. It's a global minimum corporate tax. Now, if that sounds like a dense concept, think about it for a minute. The minimum wage is to make sure that companies don't take advantage of a competitive labor market by offering close to no pay to workers who don't have the clout to bargain for more. The idea of a minimum tax is similar. Here's the president.
President Biden: I've also proposed the global minimum tax, which is being proposed around the world for US corporations at 21%. Let me tell you what that means. It means that companies aren't going to be able to hide their income in places like the Cayman Islands and Bermuda, in tax havens. We're going to also eliminate deductions used by corporations for offshoring jobs and shifting assets overseas. They offshore the job, shift assets overseas, and then don't have to pay taxes on all they make.
Brian Lehrer: There are some countries, hello Ireland, the Bahamas, the Cayman Islands, these three examples that often get mentioned, that dropped their corporate tax rates really low, specifically so companies from other countries will locate jobs or their headquarters there. Now, this starts a race to the bottom among countries and gives multinational corporations incredible power to choose their own tax rates, and avoid being responsible corporate citizens.
The same thing happens, by the way, within countries too. As many of you may know, New York and New Jersey sometimes compete for companies to come there with lowest bidder tax breaks. I have asked local officials on this show if they would consider a truce, a ceasefire, a pact, no more tax break wars, so companies can evade taxes by going one side or the other of the Hudson River. Guess what? No politician ever makes that pledge. They know, among other things, that Florida and other states are lurking.
Biden has proposed a global corporate minimum tax. How would it work? Could it really work at all? With me now on this, and I think we'll get to some other international news, is Ian Bremmer, expert in the intersection between business and global politics, columnist for Time magazine, and his academic work includes teaching at Columbia University School of International and Public Affairs. He's also founder of The Digital News and Analysis Platform GZERO Media. One of the articles on GZERO right now is called "Can Biden's Push to Tax Big Corporations go Global?" He's the author of the book Us vs. Them: The Failure of Globalism. Hi, Ian, always great to have you on. Welcome back to WNYC.
Ian Bremmer: Brian, great to be back with you.
Brian Lehrer: Can we discuss some basics first? In your GZERO Media site article, it says 55% of America's biggest companies paid no federal corporate income taxes during the last fiscal year. What are some of those companies, if you're able to name names, and how much money are the current tax laws costing the federal government in potential revenue?
Ian Bremmer: Yes. We're talking about hundreds of billions of dollars. Some of these are very large companies indeed, I mean, Apple, Amazon, for example. On any given year, it's a different number of companies, and some, it's because of primary offshoring, some, it's because they're taking losses in one year, or they're taking gains in another, they're pushing it around. Everyone's doing everything they can with a very complicated, both national and international tax code to reduce what they have to pay.
As you know, there's an enormous, unprecedented amount of spending that is coming down the pike this year, already $2 trillion in relief and stimulus at the beginning of the year, another expected $3 trillion in infrastructure jobs and other benefits over 10 years, but at the end of this year. We've never seen anything like that. A big piece of that infrastructure proposal is intended to be paid for by raising taxes on corporations, and that's why this has become such a big issue right now.
Brian Lehrer: How does this happen?
Ian Bremmer: How does it happen, meaning how does it get passed?
Brian Lehrer: No, we'll get to that, whether it can get passed and whether it can get passed by enough countries to make it meaningful, but how does it happen that companies that are American companies can locate offshore and pay the taxes of the other country?
Ian Bremmer: Yes. As you said, how does it happen that someone can leave New York City and go to Florida and end up paying virtually no local tax or state tax, and New York loses that rate? It's because we don't have global government. As you mentioned, Biden mentioned the Bahamas and the Caymans, he did not mention Ireland, because that's actually a significant country, but Ireland is the same thing, the Netherlands as well.
You have a number of countries around the world that in wanting to attract capital and wanting to attract the jobs around that, these are relatively small places usually, and they're pretty wealthy, they're willing to bring their tax rates to close to zero, or to have individual negotiations with companies in the case of the Netherlands, to get sweetheart deals for them, that allow them to avoid paying significant taxes in their home country.
If you are the CEO and you have the ability to improve profits for your shareholders, you would argue that it is your fiduciary responsibility to pay as little tax as possible. You'll remember, of course, Brian, that when Donald Trump was running for office back in 2016, he said that he was smart, because he paid virtually no taxes. Why? Because he was using the American tax code as any red-blooded capitalist would to try to ensure that he could legally pay as little as humanly possible. Every corporation out there will do that.
Brian Lehrer: You mentioned the Netherlands, let's drill down on that example a little more, because I think it's interesting. The article on your site says, "The Netherlands has attracted the likes of Google, Nike, IKEA, and others, by letting them negotiate tax rates." What does that actually mean? How does a company negotiate a tax rate? Also, I don't think Nike lists itself as a Dutch sneaker company, does it?
Ian Bremmer: No, "Just do it" is global, but meant to be seen as American. You'll remember when Amazon was talking about having their second headquarters in a city in either the United States or even potentially Canada. They were going around, and they were saying, "Hey, we're a huge company, one of the biggest in the world. We bring a lot of talent, we're going to bring a lot of money, but we don't want to pay any taxes. What kind of a deal are you going to cut us if you want us to base ourselves there?"
New York was very close to a deal, and many, including Alexandria Ocasio-Cortez, for example, were pretty agitated, that they were getting such massive benefits to come and develop Long Island City. Well, the same thing is true for the Netherlands on the global stage. They are looking to work with big corporations that have high levels of skill sets, and they're willing to charge them massively less tax on the basis of what they're willing to bring to the Netherlands. It is very much a question of what kind of a deal can you strike with this individual government?
Brian Lehrer: Listeners, any calls about a global minimum corporate tax, 646-435-7280. Is anyone who works for a multinational corporation listening who might be able to tell us a story about how this works in your business? Or anybody who's a tax accountant or anyone else, or anyone with a comment or a question on the idea now proposed by Joe Biden and Janet Yellen, the Treasury Secretary, of a global minimum corporate tax. 646-435-7280.
Curious what any of you who may have any connection to this topic may have to offer. Questions also welcome here for our guest Ian Bremmer from GZERO Media and other things. I mentioned, Janet Yellen is a leader on this as treasury secretary. Here's a clip of her the other day talking about why this might not just be in the interest of the United States.
Janet Yellen: We're working with G20 nations to agree to a global minimum corporate tax rate that can stop the race to the bottom. Together, we can use a global minimum tax to make sure the global economy thrives based on a more level playing field in the taxation of multinational corporations and spurs innovation, growth, and prosperity.
Brian Lehrer: Janet Yellen the other day. Let me put a little more of an international cast on it for our listeners and then, Ian, you can help fill this out. It's not like they're just paying those taxes to other countries at lower rates and the US is the only one that loses. Your article says, "Big European nations have been frustrated with American behemoths like Starbucks, Amazon and Google that flood their markets yet pay nothing back to their governments and their countries, including France, Germany, and the UK, that have wanted something like a global minimum tax". Explain this and how the US and European interests converge here or don't.
Ian Bremmer: They definitely converge. I think it's a big deal that Janet Yellen and the Biden administration have built enough trust to get the Germans and the French within the EU to specifically support this policy proposal, putting pressure on Ireland and the offshore centers to go along with it.
Now you know there are a lot of big trade problems between the United States and Europe. One of the biggest has been this idea of a digital services tax, that the Europeans have been hell-bent on levying against all digital companies, but, as you know, the biggest ones overwhelmingly are in the United States. That would be a big problem. If it happened, we would get into an escalatory trade fight with the Europeans. We'd be increasing tariffs on all sorts of European manufactured goods, foodstuffs, and what have you. Nobody really wants that. They've been trying to find a way around it. This is that mechanism.
If we end up with a coordinated global minimum corporate tax driven by the Americans and the European Union, you will end up having that linked with progress on a global framework for digital services tax in the next couple of months. This is coming relatively soon, we're talking about right before the upcoming G20 finance minister meeting in July.
There are a lot of places where Biden has said the United States is back because they've joined things that the Americans left under Trump, like the Paris Climate accord, or the World Health Organization, and the rest. They're trying to do the Iranian nuclear deal again, but that's not moving the ball. This is actually new US-led multilateral coordination that would matter. It would build trust, it would strengthen alliances, and it would ultimately raise more revenue for the major countries in the alliance. I think it's actually a pretty big deal.
Brain Lehrer: Before we take some phone calls, and interestingly, a lot of people are calling in on this, let's look at an exception to that, because your article cites Ireland as one European country that's resisting the idea of a global corporate minimum tax because they have one of the lowest tax rates in Europe. Tell us about some of how Ireland, in particular, has used tax rates in their economy and the impact inside and outside that country.
Ian Bremmer: Of course, it's become a massive financial center. For example, a lot of big banks and institutional investors that have been willing to set up in Ireland because their tax revenues are lower. We've seen this with Apple as well, we've seen it with a number of tech companies. Real estate has taken off as a consequence in Ireland. It's a country that's done exceptionally well, and been able to attract an awful lot of talent because the corporate base is so low.
Again, you said it at the beginning of the segment, Brian, it's a race to the bottom. When that happens, it's the opposite of companies and countries coming together to create long-term sustainable public goods. When there is no governance, and it's every company for itself, every country for itself, you end up with much less revenue that you can provide to workers, to the middle class for benefits, and it squeezes the big companies.
Brain Lehrer: Before we go to calls, is there a number? When we talk about the minimum wage, we know the federal minimum wage is $7.25 an hour, the New York state minimum wage is $15 an hour. We can put an easy number on it. Is there a global corporate minimum tax percentage in this Biden proposal?
Ian Bremmer: Yes. Corporate rates in the United States are clearly going to go up. The intention is to remove the Trump administration corporate reduction. Biden's talking about bringing it to 28%. You've got people like Joe Manchin, the swing vote in a Democrat in West Virginia that says he's more comfortable with something to 25%. It'll end up in that range. The idea is that the global alternative minimum tax would be about 75% of the statutory corporate rate, you'd end up with something like 21%.
Brain Lehrer: What makes a country like Ireland, or other low-tax countries, the Netherlands, go along with this? What could force them? Anything? Or do we have this wonderful, lovely, theoretical idea of a global corporate minimum tax so there's a level playing field and there can't be the race to the bottom, but Ireland says, "No, I'm not in"? Maybe China, with such a big economy, says, "No, I'm not in," and the whole thing doesn't matter.
Ian Bremmer: Well, it matters a lot if you have some of the world's largest economies, and the United States, of course, being the biggest, getting together and saying, "No, we're setting this." If you don't agree, first of all, you're saying that those companies are going to be forced to pay a tax rate in the United States at that rate if they're not paying at someplace else. So it gets implemented.
Secondarily, you can also, and you would be much more likely to with other countries, engage in punitive behaviors against those governments economically, whether it's tariff sanctions and whatnot, to pressure them to move their rates as well. You would actually get coordination.
Brain Lehrer: James in Greenwich, Connecticut, you're on WNYC with Ian Bremmer on the global corporate minimum tax proposal from Biden and Yellen. Hi, James. Oh, he hanged up. Okay, so we don't have him or maybe I accidentally disconnected him. Let's try John in Harlem. Oh, that disconnected John too. I think there may be a problem with our phone screening software.
Let's see, Juliana-- Okay, listeners, it's now behind the scenes time talking to my engineer, Juliana. Juliana, would you try line five? Anthony in Sunnyside, Queens, and worked. It's taking on your end. Hi, Anthony, you're on WNYC. Hi, can you hear me?
Anthony: Hey, how are you doing?
Brain Lehrer: Good. What's your question?
Anthony: I had two quick questions. One, if this bill doesn't go, or if companies or countries don't agree, if they don't go through with it, is there a way that we could bully these companies like Amazon and Google and Apple into paying their fair like, "Hey, if you don't pay these, you're just not going to have business in this country?" I'm sure it's stir an outrage, and it probably wouldn't happen, but is there a way we could convince these companies that if you're not contributing, then you're not welcome here?
Also, my second question is, what is the rhetoric the politicians are using, whether they're on the campaign trail or in office right now, that isn't working when it comes to this conversation, and what should they [unintelligible 00:17:07]?
Brain Lehrer: Anthony, thank you very much. I think that his first question, Ian, it's probably important to remind people that we're talking about these companies avoiding taxes in a way that is legal. The government couldn't say to whatever company you want to name, "You better pay your fair share in taxes, or we're not going to let you do business here." The law says you could do business here under the low taxes that you're paying.
Ian Bremmer: Yes, that's right. I think that where we see the politics playing out is much more in terms of companies doing business in China and acting in ways that are seen as hypocritical compared to the statements that they make in the United States. That has been a big issue that politicians have been on both sides of. You've seen this, of course, with Major League Baseball recently. Their decision to pull out of the all-star game from Atlanta because of the voting legislation that is seen as disenfranchising voters, making it harder to vote. Yet, they do a lot with China, where you don't have the right to vote at all.
You see similar arguments being made against American Airlines, against Delta, against Coca-Cola. Almost every Fortune 500 company does a lot of business in the United States and is pushed around by their consumers to act in ways that are seen as supporting their values aligned with them, but almost every Fortune 500 company also does a lot of business in China, where it would be inconceivable for them to act in the same way, or the Chinese government would stop them from doing business there.
That's going to become much harder when the Beijing Olympics comes up early in 2022. The politicians are right in the middle of this. The corporates are having a very hard time acting politically and acting consistently in the messaging that they have around the world.
Brain Lehrer: I think we have James in Greenwich back with us now. James, you're on WNYC. Hi, there.
James: Hello. The point I wanted to make is, I may be a little out of date on this, but I believe that there's actually provisions in the US tax code that facilitate these activities to occur like offshoring intellectual property, and R&D, and essentially transferring income to these countries. In other words, there are elements that we allow and could stop, that wouldn't rely on these other countries to take action, because I'm skeptical that places like the Cayman Islands, Bermuda, Netherlands, Antilles, that we have much leverage over them. It's more do we have the political will in this country versus can we convince third-party countries. That's my point.
Brain Lehrer: Thank you. Ian?
Ian Bremmer: I think it's a very important point. The United States is in part more unequal than any other G7 economy as industrial democracies because the US is the country that most empowers animal spirits, most empowers the private sector.
There's an upside to that, you get a lot more entrepreneurialism, you get a lot bigger corporations that can grow and thrive in the United States. There's a downside too, which is that the private sector will lobby, will use a massive amount of money to capture the regulatory process in ways that are advantage to them. For example, when Biden first became president, one of the first things he said is, he wanted the buy American provisions to have teeth.
In other words, if you're giving out American money through stimulus, you want to make sure that you're spending that on companies that are actually spending that money on American workers in the United States. There's always been massive loopholes because the companies that get that money in the past have lobbying dollars that they use to make sure, "Oh, well, there's a reason we should get this money. Oh, there's a reason we should get this money." It doesn't end up benefiting American people.
That's precisely what your caller is talking about, the fact that as you have corporations with massive capacity to lobby and get sweetheart deals cut into legislation for them, there will be exceptions. That's what I think we need to watch as this legislation gets passed as to what extent it gets messed with between when it's thought through, and when the final bill actually gets cut. Because, as you know, every single one of those Senate Democratic votes are going to be lobbied like crazy by everyone that's been paying for them to get into office.
Brian Lehrer: A particular industry in their state, for example, looking for a carve-out. This is the other side of the coin of the duality you were talking about before. If conservatives are criticizing Major League Baseball for pulling the all-star game out of Atlanta because of a voting rights change, when they're continuing to do business in countries that have no voting rights at all. The other side of that is, that those same Republicans saying corporations should stay out of politics. [chuckles] That's such a huge laugh because corporations have been encouraged by Republicans to participate in politics for decade after decade.
Ian Bremmer: Yes, "drain the swamp" being the single thing that was least conceivable for a cabinet that was most aligned with those private sector players. When you have the fossil fuel industry making the regulations for the EPA, or the fast-food industry making the policies for what your public school lunches are going to be comprised of, well, no surprise, that those policies are going to be very aligned with the interests of those corporations.
For example, this year, what you're seeing, Brian, is that there's a massive shift towards sustainable energy, a massive shift towards a transition away from fossil fuels. The reason for that is because the fossil fuel companies are so much less important in their ability to lobby. They're smaller, they don't have as much money, they're not as relevant to the politicians that are in charge.
As a consequence, you can really change the way you behave with those companies in terms of Congress. When you're talking about the big manufacturers, the big tech companies, the big banks, and you look at where the money is that comes to the senators and the members of the House to get elected and reelected, you find that, of course, those interests are very aligned.
Brian Lehrer: Let's take what might be a call of pushback on this. Christopher in Amityville, you're on WNYC with Ian Bremmer. Hi, Christopher.
Christopher: Hi. Well, Woodrow Wilson had a 70% tax rate when he went out of office and Calvin Coolidge came in. Well, 50% was the effective tax rate on the wealthy, and they paid $77 million into the Treasury.
When Coolidge cut the tax to near 20%, the same group paid 230 million in taxes. The tax rates above 18.5% do not increase revenue. Tax rates above 28% cost the government revenue because of tax avoidance. The tax under Trump, the corporate tax, went to 21% and the revenues went up. Whenever you try to bring them above as Biden is trying to do now, he's talking about a 28% tax rate, that's going to reduce government revenue.
Anything between 18.5% and 28%, although it's not going to change the revenue, is going to be like driving with your foot on the brake, it's just a waste of the energy of the poor taxpayer who has to pay that money. In terms of Amazon and their corporate tax rate, they don't make a profit. They just grow. I'm not sure how they're ever going to-- but the stock price keeps going up.
Brian Lehrer: Let me see if Ian agrees with your math. I know we hear this argument sometimes that cutting taxes results in more revenue for government, that's trickle-down economics, because economic growth more than makes up for the cutting the rates. This is kind of a corollary of that on raising rates, but I don't think most economists actually believe that. Ian, what can you tell us?
Ian Bremmer: Well, there is an obvious truth that the question is not what your tax rate is, but what people actually pay. There has been an enormous amount of avoidance. The whole purpose of the discussion that you and I are having today, Brian, is talking about stopping tax avoidance. Creating a global minimum tax, which is by far the most important piece here, is going to be to squeeze all of these countries that have been safe havens for tax avoidance.
If you do that, you're going to have more tax revenue coming in. You're also going to have less capacity for companies to avoid taxes by going to havens, and that will also allow you to raise the tax base, if you increase the percentage, I'm sure that would have an impact too. No one is suggesting 70%. By the way, I do think that you want to look at where the United States is on corporate tax, compared to all other OECD countries.
It is true that before Trump's tax changes on corporates that the United States in total tax rate was slightly higher than the average for corporate tax rate being paid, it became lower, and that definitely helped stimulate corporate growth in the United States. I buy that, but also keep in mind that for the last 40 years, the United States has increasingly become by far the most unequal. It's hollowed out the middle in the working class.
There are a lot of people out there that say, "You know what, I don't care. If rates are lower, and that means that all these people stay in the US, but I don't get any of it, well, maybe let some of those people leave. It doesn't matter to me." Clearly, there needs to be some level of balance. I think that one place that you're seeing a lot of pushback now is the question that Republicans and Democrats have thrown fiscal accountability out the window, and they said, "Look, deficits just don't matter as much. The US has the reserve currency, we can print our own money, interest rates are comparatively low, we don't need to pay for all of this.
With corporate revenue, what we really need to do is make the kind of investments into human capital and infrastructure that will make a return for the American population long-term, and if deficits go up in that environment, that's okay." Plenty of people on both sides of this argument, but the most important point is a general recognition that the US has systematically under-invested in the social contract in the safety net for decades now.
Brian Lehrer: Last question, and as kind of an addendum, because we're really talking about an international thing here, the global corporate minimum tax that Biden and Treasury Secretary Yellen are proposing that you're telling us a lot of European countries are actually interested in going along with. The addendum is, I mentioned in the intro, that this is a domestic issue, too.
I couldn't get the mayors of New York City and Jersey City to agree to a truce on a race to the bottom tax bidding war, is there anything that states and cities can do within the US domestically along those lines? Have you ever given that any thought and is there a model coming out of this international discussion for anything local and domestic?
Ian Bremmer: Oh my God, it's impossible to imagine. The level of autonomy of American cities and states, you've seen it with mask-wearing and mandates. You've seen it with talk about vaccine passports. You've seen it with rollout of vaccines. The US federal government does not have the ability to fight that fight. That would be true even if we weren't as polarized and divided as we are right now. No, I can't imagine that you're going to see more alignment on that issue.
Brian Lehrer: Ian Bremmer, president of the Eurasia Group, author of Us vs. Them: The Failure of Globalism. He teaches at Columbia University School of International and Public Affairs, and he's a founder of the Digital News and Analysis Platform GZERO Media, which has an article up right now called Can Biden's Push to Tax Big Corporations go Global. Ian, we always appreciate it. Thank you so much.
Ian Bremmer: Talk to you soon, man.
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