Democrats’ Reckless Taxing And Spending Spree Would Cost American Jobs And Help China Build Back Better

Democrats’ Deluge Of Tax Increases Would ‘Increase The Incentive’ For U.S. Companies To Move Investments And Profits Overseas, Put U.S. Multinational Firms At A Global Disadvantage, And Help China’s Tax Competitiveness

SENATE REPUBLICAN LEADER MITCH McCONNELL (R-KY): “Democrats’ reckless taxing and spending spree isn’t even fully developed, and it already contains more than 40 different tax increases that would hurt families and help China. Some of the tax hikes take aim at workers and families directly. ... [O]thers would make it much harder to invest, create, and sustain jobs here in America instead of overseas. Ivy League economists say the Democrats’ tax hikes would ‘increase the incentive’ for American companies to move investments and profits overseas. Under Democrats’ proposed expansion of the global minimum tax, more than a dozen of our most developed peers would have tax structures more favorable to U.S. companies than our own. If President Biden got his way on corporate taxes, even China would become more hospitable to job creators by comparison.  Let me say that again: Democrats are planning to send America’s top tax rate for job creators higher than communist China’s. Needless to say, the biggest losers when Democrats make it harder to do business in America are American workers!” (Sen. McConnell, Remarks, 10/6/2021)

Democrats’ Reckless Taxing And Spending Spree Would ‘Increase The Incentive’ For U.S. Companies To Move Investments And Profits Overseas

PENN WHARTON BUDGET MODEL: “We project that recent tax reforms proposed by the House Ways and Means Committee would increase the incentive of U.S. firms to shift intangible investments and profits to foreign countries with a tax rate below 20.7 percent.” (“Incentives To Shift U.S. Multinational Profits To Foreign Countries Under Tax Changes Proposed By House Ways And Means Committee,” Penn Wharton Budget Model, 10/01/2021)

According to the OECD, fifteen developed countries have a combined corporate tax rate below 20.7 percent. (The Organisation for Economic Co-operation and Development, Accessed 10/13/2021)

Under Democrats’ Taxing And Spending Spree, The Tax Rate On U.S. Multinationals’ Foreign Income Would More Than Triple, Eclipsing The Proposed OECD Global Agreement

PENN WHARTON BUDGET MODEL: “The U.S. House Ways and Means proposal as part of budget reconciliation would more than triple the U.S. tax rate on multinationals’ foreign income, from around 2.1 percent to 7.4 percent, averaged by foreign income across industries. The House proposal would tax U.S. multinationals at a higher rate than the proposed global agreement currently being negotiated through the OECD. If the U.S. instead adopted the draft OECD proposal, U.S. multinationals would pay a residual U.S. tax rate of 6.1%.” (“Effective Tax Rates On U.S. Multinationals’ Foreign Income Under Proposed Changes By House Ways And Means And The OECD,” Penn Wharton Budget Model, 9/28/2021)

While U.S. Corporations Could Lose 1 Million Jobs From A Global Minimum Tax Being Pushed By The Biden Administration, China Is Seeking A Global Minimum Tax ‘Carve Out’

According To The National Association Of Manufacturers, A Global Minimum Tax Could Cost Up To 1 Million U.S. Jobs And A $20 Billion Decline In Investment

“The tax on Global Intangible Low-Taxed Income (GILTI) operates as a minimum tax on the foreign earnings of US multinational corporations (MNCs). … This analysis finds that the Biden Administration’s proposed expansion of the GILTI tax may adversely impact the US economy with reductions in US jobs and investment. … [P]rofessional judgement informed by this paper’s analysis and its limitations combined with the results of other somewhat similar tax policy changes suggests that plausible employment effects for the US MNCs could range somewhere between 500,000 and 1,000,000 lost jobs. A similar range for the decline in investment is between $10 billion and $20 billion.” (“The Tax On Global Intangible Low-Taxed Income (GILTI) Operates As A Minimum Tax On The Foreign Earnings Of US Multinational Corporations (MNCs),” EY Analysis, Prepared For The National Association Of Manufacturers, August 2021)

‘Beijing Now Represents The Toughest Hurdle In Talks Over The Minimum Tax… It’s Seeking A ‘Carve Out’ Or Exclusion For Domestic Profit, Which…Would Undermine The Effective Tax Rate Of 15%’

“Rich nations are bracing for China to seek exemptions from a global minimum corporate tax, a potential stumbling block for governments racing to reach wider international consensus on the plan next month. Some officials see China as not easily signing on to the global minimum tax rate of at least 15% endorsed by Group of Seven finance ministers last week, people familiar with the discussions said on condition of anonymity because of the sensitivity of the talks.” (“China’s Likely Bid For Tax Exemption Poses Risk To Global Accord,” Bloomberg, 6/09/2021)

  • “Beijing now represents the toughest hurdle in talks over the minimum tax, according to one person familiar with the discussions. It’s seeking a ‘carve out’ or exclusion for domestic profit, which the person said would undermine the effective tax rate of 15%. The agreement could ultimately provide a limited carve-out to satisfy China but not to the extent it would undermine the minimum tax rate, the person said.” (“China’s Likely Bid For Tax Exemption Poses Risk To Global Accord,” Bloomberg, 6/09/2021)
  • “Some of its high-tech businesses are taxed ‘well below’ 15%, and China ‘could propose carve-out measures for those sectors,’ said Wang Zecai, a researcher at the Chinese Academy of Fiscal Sciences, a think-tank affiliated with the Ministry of Finance, who said this was his own view rather than an official position. ‘Other nations may do the same as they may have similar domestic policies to encourage innovation.’” (“China’s Likely Bid For Tax Exemption Poses Risk To Global Accord,” Bloomberg, 6/09/2021)

“Yang Jiechi, President Xi Jinping’s top foreign-policy aide, in March told U.S. Secretary of State Antony Blinken that China wouldn’t follow ‘what is advocated by a small number of countries as the so-called rule-based international order.’ While the immediate context to Mr. Yang’s comments appeared to be Western criticism of Chinese human-rights policies, Beijing has repeatedly demanded a seat at the table for major governance decisions. A spokesman for China’s Foreign Ministry on Monday sidestepped a question on the merits of the tax proposal.” (“The G-7’s Global Tax Deal Faces a China Test,” The Wall Street Journal, 6/09/2021)

Under Democrats’ Taxing And Spending Spree, American Businesses Would Pay A Higher Corporate Income Tax Rate Than Communist China 

The House Ways And Means Committee Approved $2.1 Trillion In New Taxes, Including Increasing The Corporate Tax Rate To 26.5 Percent And Raising Taxes On U.S. Overseas Earnings

“The biggest set of U.S. tax increases in a generation took a major step forward on Wednesday with approval by the House Ways and Means Committee of $2.1 trillion in new levies mostly focused on corporations and the wealthy. For businesses, the legislation approved by Ways and Means would: Increase the top corporate tax rate to 26.5% from 21%... Boost taxes on overseas earnings for U.S. multinational companies…” (“Tax Hikes to Pay for Biden Agenda Approved by House Panel,” Bloomberg, 9/15/2021)

Communist China Has A Statutory Corporate Tax Rate Of 25 Percent And A Lower 15 Percent Rate For Qualified Businesses In The High-Tech Sector

“China has a basic corporate tax rate of 25% for most companies, but reductions for high-tech sectors and for investment in research and development mean effective rates can fall below 15%. Beijing will want to retain tax incentives that it sees as key for its economic development, especially in advanced technologies.” (“China’s Likely Bid For Tax Exemption Poses Risk To Global Accord,” Bloomberg, 06/09/2021)

  • “Under the [corporate income tax] CIT law, [China’s] standard tax rate is 25%. A lower CIT rate is available for the following sectors/industries on a national basis: Qualified new/high tech enterprises are eligible for a reduced CIT rate of 15%. … Qualified technology-advanced service enterprises are eligible for a reduced CIT rate of 15%.” (PricewaterhouseCoopers, Accessed 9/16/2021)

FLASHBACK: Democrat Leaders Said ‘One Of The Main Challenges Of The 21st Century Will Be Competing With And Confronting China’, ‘That Means Making Sure Every Nation Plays By The Same Rules In The Global Economy, Including China’

PRESIDENT BIDEN: “We’re in competition with China and other countries to win the 21st Century.  We’re at a great inflection point in history. … The investments I’ve proposed tonight also advance the foreign policy, in my view, that benefits the middle class. That means making sure every nation plays by the same rules in the global economy, including China.” (President Biden, Address to a Joint Session of Congress, 4/28/2021)

  • BIDEN: “And we’ll also take on directly the challenges posed by our prosperity, security, and democratic values by our most serious competitor, China. We’ll confront China’s economic abuses; counter its aggressive, coercive action; to push back on China’s attack on human rights, intellectual property, and global governance. … If we invest in ourselves and our people, if we fight to ensure that American businesses are positioned to compete and win on the global stage, if the rules of international trade aren’t stacked against us, if our workers and intellectual property are protected, then there’s no country on Earth — not China or any other country on Earth — that can match us.” (President Biden, Remarks, 2/04/2021)

SENATE DEMOCRATIC LEADER CHUCK SCHUMER (D-NY): “Everyone knows our country and our economy faces daunting challenges beyond COVID-19. And while our two parties don’t agree on a whole lot, both Republicans and Democrats know that one of the main challenges of the 21st Century will be competing with and confronting China.” (Sen. Schumer, Remarks, 2/24/2021)

  • SCHUMER: “For nearly a century, America’s national security and economic security has been grounded in our scientific and technological superiority—often supported by smart investments by the federal government. But in recent years, countries like China have closed the gap with the United States. If we fail to respond, they will overtake us, with drastic consequences for our workers, businesses, and allies and partners around the world. … That’s because there is a bipartisan consensus that the United States must invest in the technologies of the future to out-compete China.” (Sen. Schumer, Remarks, 4/21/2021)