Foreign Affairs: Ending the Race to the Bottom: The Global Minimum Tax Deal Is About More Than Fairness, by Joseph E. Stiglitz (Columbia; Google Scholar), Todd N. Tucker (Roosevelt Institute; Google Scholar) & Gabriel Zucman (UC-Berkeley; Google Scholar):
The year is 2100. Humanity has averted the worst impacts of climate change, as economies around the world decarbonized by 2050 and even went “carbon negative” in the decades that followed. Since the end of the U.S. occupations of Iraq and Afghanistan, there has not been a major war, and after initial escalation of tensions between the United States and China earlier in the century, there was no new Cold War. Instead of the competition for resources that characterized earlier periods of humanity’s history, an ethos of cooperation emerged.
Historians debate when the turning point occurred, but the leading school of thought pinpoints 2021 as the moment of change. Prior to that point, it was seen as acceptable and even smart economic policy to charge little to no tax on society’s wealthiest individuals and corporations. Countries even competed with one another so that if one nation raised taxes to tackle inequality’s corrosive effects on economic growth and democracy, its neighbor would respond by cutting taxes. This engendered a shift of profits on paper from the first to the second country, even if no actual productive activity shifted its location. In this world, wealth was unmoored from the communities that helped produce it, spawning a global elite that plundered with impunity. This helped spark populist and authoritarian movements around the world.
There was no way to accomplish the big transformations humanity needed without redirecting resources away from ultrawealthy individuals and massively profitable firms and toward investments in the common good. Disrupting this extractive pattern required governments to make it harder for corporations to move money and economic activity across borders for the purpose of minimizing their tax bills. The key was setting a global minimum tax rate, which countries finally achieved in 2030, inaugurating a new form of globalization in which international cooperation prevailed, wages rose with productivity, and inequality receded.
This speculative future is not implausible. It is, in fact, a potential outcome of the historic tax agreement in July among more than 130 countries. As we explained in Foreign Affairs in 2020, squashing the global tax-avoidance industry is not only vital to establishing a sense of fairness in the international economic system; it is also an important tool for coping with climate change and addressing the myriad other issues facing the world today. Warming temperatures are disrupting food supply systems, infrastructure, and global health. Governments need revenue to deal with these changes. Whether the new global tax deal helps provide countries with the resources they need will depend in part on whether they can summon the political will to finalize it and rigorously enforce it. ...
There is an alternative vision to the utopian one presented in the beginning of the article, a dystopian outcome in which global anger at corporations writ large explodes. There are ample reasons for the growing fury with the corporate sector. Consider the financial crisis of 2008, the opioid epidemic, and the exploitive and manipulative behavior of digital monopolies such as Amazon and Facebook. When companies make their profits at the expense of ordinary citizens and use their money to ensure that they don’t pay their fair share of taxes, it adds to the public’s ire and threatens the stability of economic and political systems.
As demonstrated by the survival of the perverse tax rules that shaped the twentieth century, the choices that countries make in the coming months will be hard to change. That is why it is so important to get the details right. It is not an overstatement to say that societies’ capacity to survive and thrive depends on it