“In 2017, former President Donald Trump’s administration improved the corporate tax system by lowering the top corporate income tax rate from 35 percent to 21 percent. At the same time, the worldwide tax system, under which income is taxed by a firm’s home country no matter where it is earned, was replaced by a territorial tax regime. In this system, income is taxed only in the country where it is earned. For example, an American company earning income in France is taxed only in France, not in the U.S.
This new system is a vast improvement for U.S. companies, which in turn helps repatriate their foreign profits here. However, it does put pressure on politicians to further lower tax rates and diminish incentives for corporations to locate their production abroad or shift reported profits overseas. Don’t forget that there are still plenty of nations with corporate tax rates lower than those imposed in the United States.”
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“the idea of cajoling other governments to impose a global 15 percent minimum tax rate on foreign companies’ incomes earned within their borders.
Under this cartel of countries, with foreign governments committed to refusing to compete for capital by cutting tax rates, the incentives for U.S. companies to avoid high U.S. taxes are seriously reduced. So are the incentives for governments to keep their own tax systems modest.
Whether Yellen can convince countries like China and India to go along is an open question. The proposal also faces political headwinds in the European Union, which usually supports any attempts to hinder tax competition.
Finally, it’s unclear that Yellen can convince Congress to go along with her scheme. The reason, in part, is that enough legislators are skeptical of whether a global minimum tax will truly increase Americans’ prosperity, especially given the current fragility of the global economy.”