GOP Congressman: U.S. Tax Sovereignty Under Threat

Newsweek

5 hours ago

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The U.S. tax code is subject to continual review by Congress. It's a system that honors merit; tax incentives in the United States aim to reward pro-growth outcomes. Success in the marketplace comes from innovation, productivity, and job creation. That's the American way.
The American approach to tax competition isn't a chaotic free-for-all; it's a deliberate engine that drives investment based on real economic potential. Businesses thrive or fail based on market fundamentals—supply, demand, innovation, efficiency—not on the whims of a government handout.
Our tax system stands tall in a world where economic freedom is losing ground. It's a beacon of hope, but the global tax deal negotiated at the Organisation for Economic Co-Operation and Development (OECD) threatens to snuff it out.
The OECD's global tax deal includes a new 15 percent minimum corporate tax for countries that have never had one. It's intended to end tax-dodging by multinationals, but its flawed design trades one problem for another. Instead of fostering open, fair, and transparent markets, it will usher in a Hunger Games-style contest for direct state subsidies in the form of direct cash handouts or refundable tax credits. Countries will dangle these incentives to lure businesses to their shores.
This shady system favors political connections and authoritarian governments over ingenuity and innovation.
WASHINGTON, DC - OCTOBER 24: U.S. Rep. Kevin Hern (R-OK) speaks to the media after leaving a House Republican conference meeting in the Longworth House Office Building on Capitol Hill on October 24, 2023 in...
WASHINGTON, DC - OCTOBER 24: U.S. Rep. Kevin Hern (R-OK) speaks to the media after leaving a House Republican conference meeting in the Longworth House Office Building on Capitol Hill on October 24, 2023 in Washington, DC. MoreAs currently formulated, the deal will place U.S. multinationals at a disadvantage in two critical ways: (1) they face two layers of minimum taxes—the existing U.S. system and the emerging OECD system—and (2) their traditional income-based tax incentives face stricter scrutiny than the corporate welfare regimes in China and the EU.
Under current OECD rules, traditional tax incentives can easily trigger the OECD minimum tax, allowing other countries to siphon away the U.S. tax base. On the other hand, the direct cash handouts or refundable tax credits favored by the OECD are far more likely to be protected from the OECD minimum tax regime.
Far from progress, this is cronyism dressed as fairness, and it's being forced on nations worldwide under the OECD's banner.
Here's the truth: pushing subsidies out of the income tax system and into the hands of bureaucrats is an inefficient way to energize economic activity. It distorts markets, picks winners and losers, and forces taxpayers to foot the bill for political pet projects that have dismal economic prospects.
If other nations want to tie their economies in knots with this nonsense, that's their decision. The U.S. won't play the role of global nanny, dictating domestic policy to sovereign states. Countries around the world are free to determine a domestic policy that meets their political and economic demands. Right?
Wrong. This stops being a "mind your own business" issue the moment the OECD's grand plan starts picking American taxpayers' pockets to fund France's social programs or Germany's pet projects.
The global tax deal isn't just a friendly suggestion. It's a loaded gun aimed at countries that don't join in. It's taxation without representation on steroids, a direct threat to our economic sovereignty.
America's tax sovereignty belongs in Washington, D.C., not Paris.
I'm glad that President Donald Trump and Secretary Scott Bessent believe this, too. My colleagues and I are continually working to improve a U.S. tax system built on a principle worth defending: competition should be about economic productivity and value, not favoritism. The OECD's subsidy circus flips that principle on its head, dragging the world toward a future where markets bend to political will and growth and prosperity will stagnate.
We've seen that movie before, and (spoiler alert) it doesn't end well. Washington needs to hold the line, reject this global tax trap, and remind the world why economic freedom still matters. Our businesses, our workers, and our taxpayers deserve nothing less.
Representative Kevin Hern serves as Chairman of the House Republican Policy Committee and sits on the Tax Subcommittee of the House Ways and Means Committee.
The views expressed in this article are the writer's own.