Democratic Policymakers Express Concerns about Raising International Taxes on American Companies
Lawmakers have repeatedly warned that raising GILTI taxes will harm American competitiveness
In multiple letters to congressional leadership, Democratic lawmakers from across the country have expressed concerns that the proposed tax increases on the foreign earnings of U.S. companies would make it harder for American businesses and American workers to compete globally.
The U.S. is the only country in the world that imposes a minimum tax on the foreign income of its own companies (“GILTI”). While there is an ongoing effort within the Organization for Economic Cooperation and Development (OECD) to encourage other countries to adopt foreign minimum taxes of their own, any adoption of a minimum tax by those countries is entirely voluntary. Further, even if other countries choose to adopt a foreign minimum tax consistent with an OECD framework that is still under development, it would take years before their minimum taxes were actually in effect.
Because the U.S. is the only country in the world with a foreign minimum tax, pending proposals before Congress to increase GILTI taxes would widen the disadvantage American companies face in competing with their foreign counterparts who are not subject to minimum taxes by their home countries. Further, the proposed legislation would increase taxes under GILTI by even more than the OECD’s guidelines for a foreign minimum tax, leaving American companies at a competitive disadvantage even if other countries eventually enact foreign minimum taxes of their own.
That’s why lawmakers have recently written to their leaders to express concerns over increasing GILTI taxes.
Representatives O’Halleran, Cuellar and Correa asked party leaders to “pause” their plans to raise taxes on the overseas earnings of U.S. companies. In a letter to House Speaker Nancy Pelosi, the lawmakers say they first want to see how other countries implement a new agreement to create a global minimum tax on multinationals, cautioning that proposed GILTI changes risk American competitiveness and could result in American job losses.
Representative Dean Phillips (D-MN) | October 2021
Representative Phillips wrote leadership with concerns on plans to increase GILTI taxes, noting that increases in the U.S. taxes Minnesota businesses pay on their foreign earnings would make it more difficult for them to compete globally.
Three Texas Democrats wrote to leadership with concerns that a GILTI tax increase will inhibit U.S. competitiveness abroad and risk American jobs and competitiveness. They point out that the U.S. cannot afford to foster anticompetitive behavior or incentivize companies to harbor earnings overseas rather than here in the U.S.
Representatives Bradley Schneider (D-IL), Mikie Sherrill (D-NJ), Ron Kind (D-WI), Stephanie Murphy (D-FL), Haley Stevens (D-MI), Terri Sewell (D-AL), Lizzie Fletcher (D-TX), Thomas Suozzi (D-NY), Vicente Gonzalez (D-TX), Steven Horsford (D-NV), Angie Craig (D-MN) | August 2021
Eleven House Democrats wrote to leadership cautioning that GILTI tax increases risk America’s global competitiveness, stating “Enacting tax increases above and beyond the final implemented OECD agreement, or getting out too far ahead of our OECD partners, would risk U.S. international competitiveness.”
It’s clear that lawmakers have strong concerns with the impact that increasing GILTI taxes would have on American businesses and American workers. Congress should wait for our major trading partners to enact foreign minimum taxes of their own before considering increases in the GILTI minimum tax. Raising taxes on GILTI before other countries have enacted foreign minimum taxes of their own would put the U.S. even further out of step with our international competitors, harming U.S. businesses and American workers.
To learn more about the Alliance for Competitive Taxation, please visit www.actontaxreform.com.