The Bill Isn’t Signed Yet, But Other Countries Have Already Launched a ‘Race to the Bottom’ to Undermine New US Corporate Tax Cuts
Before Trump has signed the new tax law, there are already troubling signs that it is the first shot in a global tax war that threatens working people and the public pension plans that sustain them in old age.
The Trump bill, which reads like a wish list for Goldman Sachs and its clients, has already triggered an aggressive “race to the bottom” in international corporate tax rates, rules and regulations. It is the exact opposite of his campaign promise to help the middle class.
What the mainstream American news has failed to notice are the global responses, including:
- Australia’s Finance Minister warned that its economic growth rate might fall by a third unless it responds fast to the Trump/Goldman Sachs legislation. Accordingly, he promised that Australia will soon slash its own corporate tax rate from 30% to 25%. He said even that rate may be too high.
- Just this week, Argentina’s conservative President Mauricio Macri—who reportedly maintains close ties with Trump—announced plans to cut Argentina’s corporate tax rate from 35% to 25% by 2020.
- In Europe, Austria’s new government just announced that it is considering a similar reduction.
- Norway cut its 25% corporate income tax rate to 24% this month. More cuts may be coming.
- France’s corporate tax rate will be cut from 33% to 27% by 2022. Britain moved pre-emptively last April, cutting its corporate rate from 20% to 19% with plans to reduce it to 17% in 2020.
South Korea, Mexico and Chile are also actively considering corporate tax cuts, in response to the U.S. measure, my interviews with key global tax analysts around the planet reveal.
The Argentinean corporate tax cuts are especially troubling because they may well turn out to be an ominous precursor for what may happen to Social Security in America.
Macri, channeling how the American tax cuts were drafted in secret and then rammed through without hearings, “Trumped” deep cuts in pensions through Argentina’s Congress this week.
In Washington, Congressional Republicans have tried for years to weaken Social Security and undermine its finances in the hopes they can kill the most popular social support program in the country. They are expected to step up their efforts to weaken Social Security, arguing that with the tax cut legislation there just isn’t enough money to sustain the social safety net.
An indication of this approach emerged with regard to CHIP, the popular Children’s Health Insurance Program. It finances often life-saving medical care for more than nine million children and 300,000 pregnant women.
CHIP was enacted in 1997. One of its co-sponsors was Senator Orrin Hatch, a Utah Republican. On Dec. 17 Hatch indicated that America cannot afford to continue the program, which will begin cutting children off in January unless funding is restored.
The cost of CHIP is about $15 billion annually, roughly a tenth of what the Trump/Goldman Sachs tax bill will add each year to the federal debt.
The complex and hastily drafted Trump/Goldman Sachs tax bill makes at least 121 key changes that will impact more than $8 trillion of federal tax revenues over the next decade.
Trump and his sycophants claim that the corporate tax favors will more than pay for themselves. They assert that the big cuts in corporate tax rates and other favors for business will prompt much more U.S. economic growth, with many new jobs and higher wages. Wishful thinking is the response of numerous economists who are not on the Trump/Goldman Sachs payroll.