From public university programs that teach young people to hate America to massive IRS funding boosts to expand taxpayer audits, too many U.S. tax dollars work against American interests.
On the international stage, it’s the same story.
The Organization for Economic Cooperation and Development is a Paris-based international organization whose supposed purpose is to spur economic cooperation between countries. Increasingly, however, it acts as an unelected global legislative body cramming down left-wing policies around the globe.
The U.S. is the largest contributor to the OECD’s $338 million annual budget. And with the help of the Biden administration, the OECD has been using that funding to pressure nations to adopt a global minimum tax system that is a particularly bad deal for America.
According to U.S. government estimates, this tax scheme could drain the U.S. Treasury of $122 billion or more in revenues over 10 years. Even as it adds this cost to the national debt, the global minimum tax system would leave America-headquartered companies paying more in taxes—not less.
Under the new international tax paradigm, foreign governments would gain the right to tax large American companies on U.S. income if that income is considered undertaxed. Supposedly, “undertaxed” would mean it faces a corporate tax of less than 15%. But the OECD’s new undertaxed profit rule uses a different tax base, so many U.S. based companies would run afoul of the rule despite paying a 21% federal rate plus state taxes.
American companies would be hit the hardest not because U.S. corporate taxes are low by international standards—they’re not—but because the Europe-dominated OECD designed the global tax to target U.S. companies based on their size, digital business models, and organizational structures.
Incredibly, President Joe Biden and Treasury Secretary Janet Yellen have signed off on this tax scheme. Now the European Union, Canada, Japan, South Korea, Switzerland, and the United Kingdom are apparently plowing forward with plans to implement it in 2024 or 2025.
If these countries impose discriminatory extraterritorial taxes on U.S. companies, the cost of running businesses based in the U.S. will rise and the American people will pay the price.
If the U.S. goes along with the OECD and adds its own global minimum tax, the Treasury would still lose about $56 billion of revenue, and taxes would rise even higher around the world.
To their credit, the House of Representatives is responding to the OECD assault on U.S. tax sovereignty by pushing to end the U.S.’s self-destructive OECD funding. The House-passed State, Foreign Operations, and Related Operations appropriations bill would reduce contributions to international organizations like the OECD by 83%, from $1.44 billion to $246 million.
The Committee Report says, “The Committee recommendation does not include funding for assessed contributions to the OECD. The Committee does not support the work of the OECD that promotes higher tax rates, corporate tax floors, and digital tax schemes that target the American tax base."
Indeed, contrary to what some in Washington might think, with a national debt that’s now over $250,000 per household, the U.S. government has no obligation to continue throwing U.S. tax dollars at international organizations that scheme against U.S. interests.
Unfortunately, the counterpart appropriations bill in the Senate would move in the opposite direction, increasing contributions to international organizations by 13%. This is one of many funding battles to watch as Congress debates government spending levels for the next fiscal year.
In addition to efforts to wield the power of the purse strings and defund the OECD, some in the House are taking a more assertive approach. House Ways and Means Committee Chairman Jason Smith, R-Mo., introduced legislation that would hit back at countries that enact the OECD’s proposed taxes aimed at U.S. companies. Under his Defending American Jobs and Investment Act, if countries move forward with these proposals, the U.S. would impose an additional 5% tax rate—each year, for four years—on individuals and companies in those countries.
In September, Smith and others on the Ways and Means Committee traveled to Paris to tell OECD members that the U.S. would pursue countermeasures against countries adopting the new tax, sending a not-so-subtle reminder that the U.S. is an economic force that shouldn’t be taken lightly.
The United States must not sit idly by and watch as the world stakes claim on American treasure.
And the American people shouldn’t assent to letting our elected representatives cede America’s tax sovereignty to OECD bureaucrats in Paris.
Preston Brashers is a senior policy analyst focusing on tax policy in The Heritage Foundation’s Hermann Center for the Federal Budget.
