America Has Left the Building: U.S. Loses from our Global Tax Policy Choices, Others Could Gain

In late April, international leaders descended on Washington, D.C. for World Bank and International Monetary Fund meetings. Some of us at the Institute on Taxation and Economic Policy sat down with German Member of Parliament Armand Zorn, Finnish tax expert Lauri Finer, and Knut Panknin of the Friedrich–Ebert Foundation.

German parliamentarian Armand Zorn met with ITEP staff Spandan Marasini, Jessica Vela, Amy Hanauer, and Matt Gardner, along with Knut Panknin (Friedrich-Ebert Foundation) and Finnish tax expert Lori Finer

We like meeting with tax policy leaders from abroad. In our office last year, a Lebanese delegation began arguing vigorously with each other in Arabic. When we asked them to translate, one alleged that the other cared more about bankers than workers. He retorted, to much laughter, that she was “the Bernie Sanders of Lebanon.”

I’ve met MP Zorn before, and we’ve joked about taxes, immigration, and politics. My American husband’s grandfather, Kurt Moosdorf, was a local elected official in Zorn’s Frankfurt district after World War II, while Zorn’s family came to Germany from Cameroon.

This year’s meeting featured grimmer humor. ITEP’s research finds that better taxation of corporations would rein in tax avoidance by multinational corporations, contain the enormous inequality that leaves working people behind, and raise resources to invest in people, communities, and the planet we all share. For a while, it looked like the decades-long cooperation between Germany and the U.S. would yield shared progress on this front. But the world is now moving forward on tax policy with active opposition from the U.S., as I explained at the recent Foreign Policy magazine “Solutions Summit.”

Between 2019 and 2023, the U.S. helped develop an international agreement to ensure that the 100 largest multinational corporations pay taxes. But in summer 2022, Sen. Joe Manchin joined all the Republicans in his chamber to reject legislative changes that would implement the agreement under U.S. law. We remained hopeful that Congress would eventually approve U.S. participation in the global framework. But when President Trump returned to the White House, he issued an executive order declaring that the deal has “no force or effect” in the U.S.

President Trump and Republican leaders in Congress don’t agree on everything but they share a desire to let multinational corporations dodge U.S. taxes. In contrast, many policymakers in other countries understand their shared interest in raising revenue from big tax avoiders and see collective benefits to moving forward with the deal, with or without the U.S.

Finland, Germany and some 138 other countries are now proceeding and could soon be raising substantial revenue from big corporations that operate in more than one country. If so, they will be raising money from big American multinationals – money we could be collecting here in the U.S., but that will instead support communities in Japan, Canada, Finland, and around the globe.

Sometimes tax policy encourages a race to the bottom where one jurisdiction lowers rates to lure companies from nearby. The global minimum corporate tax is structured the opposite way: countries who take part and enact the tax will benefit, but countries like the U.S. that opt out will lose out.

The global minimum tax ensures that large corporations pay a tax of at least 15 percent of their profits. If the regular tax rules in a country where they do business allow them to pay less, the agreement requires them to pay an additional amount to bring the effective tax rate across all the places they earn profits to 15 percent (with some exceptions we’ll ignore for simplicity). With other countries proceeding and the U.S. opting out, multinationals would pay taxes to other governments and none to the U.S., benefiting Brazilians, Germans, and other citizens, but not Americans.

This resembles the international collaboration that Trump’s chaotic tariff policies are spurring on trade. Trump’s tariffs are highly regressive, raising taxes for low- and middle-income American workers and provoking retaliatory tariffs that will suppress U.S. exports. But they’ve led the European Union and China to discuss trading more with each other. Great Britain, which had left the EU, now seems eager to resume a higher level of trade and to enable workers to again move between Europe and Britain.

Of course, there are risks for the whole world when U.S. policy is so destructive and unpredictable. But countries that once looked to the U.S. for direction have concluded they need to form alliances without us. If so, it will often be to the benefit of other people around the globe and to the deficit of U.S. communities.

The global corporate minimum tax is one example. There’s also interest in a global billionaire tax and a global climate tax. Where the U.S. once led discussions like these, we’ve now ceded our leadership role and become an obstacle. The world may end up better or worse off without us in the room. But it’s clear that Americans – from New Hampshire to Nebraska to Nevada – will be left behind.

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