Congress should recognize that Pillar Two has significant U.S.-specific downsides, but also that it cannot unilaterally stop Pillar Two from taking effect. Instead, it should carefully consider a policy response for the next Congress, when a variety of forces are likely to compel it to act.
The early evidence indicates that making a “good return greater” through Opportunity Zone tax incentives is an ineffective and poorly targeted way to raise the living standards of low-income residents.
The technical rules that were once solely the province of tax wonks in D.C. and Paris are being brought out into the public sphere.
The JCT analysis raises some useful questions for the U.S. domestic debate over Pillar Two. The Treasury Department should examine its support for an agreement that will reduce its own revenue intake. But it is also worth noting that the principal mechanism for the revenue reduction—the foreign tax credit—is a policy already baked into U.S. law, including the Republican-enacted global minimum tax from 2017. The OECD deal merely takes advantage of this longstanding feature.
Lawmakers should avoid delivering social and economic benefits through the tax code whenever possible and work to simplify or repeal the tax expenditures already in the tax code.
Rather than continue down the path of growing debt, lawmakers should craft a comprehensive solution. International experience cautions against tax-based fiscal consolidations, but modest tax increases may be part of a successful debt reduction package.
According to the International Monetary Fund (IMF), the U.S. federal government is among the most indebted governments in the world.
As policymakers look to tackle America’s debt and deficit crisis, they should consider international experiences on successful fiscal consolidations.
Focusing on the “threat” to European industry caused by the Inflation Reduction Act rather than internal tax system flaws puts the EU at risk of slower economic growth and possibly losing some of its important industrial base. It is also contrary to the EU’s geopolitical goals.
Treasury Secretary Janet Yellen offered estimates from the EU Tax Observatory as evidence that the Polish government would benefit from supporting the global tax deal. Unfortunately, evidence was, at best, out of date.