David Kamin (NYU), Why Book Minimum Taxes? Taking Politics Seriously, 177 Tax Notes Fed. 193 (Oct. 10, 2022):
In this article, Kamin explores the political and institutional challenges that the book minimum tax seeks to address, and he concludes that the case for it in the international context is strongest even though it has been used to overcome detrimental interest-group politics in the domestic context. ...
Taking Politics Seriously
At the extreme, justifying policy based on “political limits” might imply a nihilistic approach to tax policy analysis and policy analysis generally. It could be said that “because it’s what OECD or Congress did, that is what is possible.”
That is not what I mean here. Instead, what I mean is to take seriously specific structural forces in our politics both globally and domestically, and then consider the wisdom of policy changes given those forces. The politics aren’t determinative of whether a change is a good idea, but they inform the types of relevant alternatives, and they illuminate when policy tools may in fact be designed specifically to overcome coordination problems in our politics that undermine action toward the collective good.
That is exactly what the book minimum tax is doing, and there are no good alternatives in the international context for addressing profit shifting to low-tax jurisdictions. In sum, the most compelling reason to pursue book minimum taxes lies in our politics, and the question, especially in the international arena, is now whether they can successfully solve a critical coordination problem that other tax tools have not. In my next article, I will better define the problem that the global minimum tax solves and explain how the agreement represents an important step, even as its ambition has been overstated by both proponents and critics.
David Kamin, The Ambition and Limits of the Global Minimum Tax, 177 Tax Notes Fed. 385 (Oct. 17, 2022):
In this follow-up article on book minimum taxes, Kamin examines the fundamental ambition of the global anti-base-erosion agreement, and he argues that the agreement is more targeted than some commentators suggest.
A Minimum Minimum Tax
The minimum tax that has emerged from the recent years of negotiation should be seen for what it is — and praised for what it can accomplish, rightly criticized for some of the limits on its ambition, and not painted as sharply restricting how governments treat business activity.
This regime won’t stop countries from delivering subsidies toward large businesses and even racing each other to do so. Competition among countries of this kind would live on. As long as they do so with grants, tax credits consistent with guardrails, faster than economic depreciation, or tax subsidies for activity undertaken by smaller companies, the minimum tax does little to arrest that. Today’s global race involving semiconductor manufacturing and clean energy technology is one example of that — and the United States is now undertaking a response. Perhaps one day, governments around the world will come to the view that the cost of such races is no longer worth bearing and would be willing to give up flexibility to stop it. But that isn’t the world we have now.
The agreement on the table does stop a competition: the race for paper profits through profit shifting and for activity associated with the largest returns. That shouldn’t be mistaken for a small goal. But it is a much more limited goal than significantly constraining government fiscal policy when it comes to business taxation and subsidies. So what has emerged is a minimum minimum tax in that important sense. And the question now is whether the world can move forward in cooperation.