Opinion - How Trump is ending Europe's sabotage of our prosperity

Yahoo

07-03-2025

While President Trump is currently shaking international norms, there is one area where his challenge to global institutions is profoundly good: ending America's acquiescence to the Organisation for Economic Cooperation and Development's tax cartel.
On his first day back in office, Trump signed a memorandum making clear that this 'Global Tax Deal' has 'no force or effect' in the United States. Instead, he tasked the treasury secretary with making recommendations for reform, signaling a return to full U.S. tax sovereignty and a decisive rejection of European economic defeatism.
For years, the OECD — a France-based institution originally designed to promote economic growth — has instead waged war on tax competition. Mistakenly believing that taxes should be collected regardless of where business fundamentally takes place, and that international pressure to offer low taxes or favorable business conditions represents some kind of 'race to the bottom,' it has sought to impose a European-style model of high taxation and economic stagnation on the rest of the world.
Its flagship initiative is a two-pillar corporate tax deal, a scheme designed to siphon U.S. business revenues into the coffers of bloated European governments. By pulling out of this misguided arrangement, Trump dealt a blow to bureaucrats in Brussels and Paris who believed they could dictate American tax policy from across the Atlantic.
The first pillar of the plan would reallocate corporate profits based on customer location rather than where a company is headquartered or where its innovation takes place. The practical effect? A massive transfer of U.S. tax revenues to foreign governments.
By some estimates, American companies would have borne nearly 60 percent of the cost of this scheme. European policymakers, unable or unwilling to create an environment that fosters more entrepreneurship, argued that this is the 'fairest' tax policy. What's fair about forcing the most innovative companies in the world to subsidize the inefficiencies of high-tax welfare states?
The second pillar of the OECD's plan, a globally mandated minimum corporate income tax of 15 percent, was even more brazen. The goal was clear: abolish tax competition and impose a de facto cartel, preventing countries from using pro-growth tax policies to attract investment.
This fixation on stopping a so-called race to the bottom ignores the reality that tax competition has been a boon to global prosperity. Since the 1980s, the steady decline in corporate tax rates has spurred investment, driven productivity gains, and created millions of jobs. European policymakers apparently see this dynamism not as a model to emulate, but as a threat to be neutralized.
Trump's swift rejection of this OECD tax regime is more than just a defense of U.S. sovereignty; it is a declaration that the U.S. will continue to embrace growth and innovation rather than succumb to managed decline. Europe's economic stagnation is not an accident — it is the inevitable result of high taxes, crushing regulation and a cultural hostility toward risk-taking and wealth creation. Rather than reform, European leaders have doubled down, turning to institutions like the OECD to globalize their failures.
This is a dramatic reversal from the Biden administration's inexplicable embrace of the OECD plan, despite the fact that it would disproportionately harm American companies. Under Biden, U.S. policymakers seemed content to let Brussels and Paris dictate the terms of global tax policy.
But Trump's memorandum should be just the beginning. If the OECD remains committed to undermining tax competition and redistributing American tax revenues to Europe, why should the U.S. continue to fund it?
The U.S. is the single largest budgetary contributor to the OECD, underwriting an institution that actively works against American interests. If the OECD refuses to return to its original mission of promoting economic expansion and free trade, Washington should consider withdrawing from it altogether.
Since the U.S. joined the OECD through an executive agreement rather than a formal treaty ratified by the Senate, withdrawal could be initiated by the president without congressional approval. The State Department, which oversees U.S. participation in the OECD, would need to notify the organization's secretary-general of the decision to withdraw.
The U.S. could also immediately halt its financial contributions, which are appropriated through the federal budget and managed by the Department of the Treasury. While there is no formal exit clause in the OECD's founding convention, the U.S. could set a withdrawal timeline unilaterally, similar to past exits from international organizations such as UNESCO.
Europe's economic malaise is a cautionary tale, not a blueprint. By rejecting the OECD's tax cartel, Trump has reaffirmed America's commitment to the principles that made it an economic powerhouse: low taxes, regulatory freedom and a culture that rewards success rather than punishes it.
The U.S. does not need Europe's permission to compete. It should lead by example and let the world follow.
Jack Salmon is a research fellow with the Mercatus Center at George Mason University.
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