Manchin kills tax agreement (and now unkills it - Inflation reduction act)

Herding
Cats

 

We are forfeiting leadership

 

Senator Manchin with a demonstration in how to tell us you have offshored money without telling us you have offshored money.

 

Manchin is a real American Hero. Someone has to stop the libbie agenda.

 

You basically have no idea what you are talking about.

This was an international tax agreement to try and get after tax havens, offshoring, and complex tax strategies that let global corporations “park” profits overseas and basically shop around for a tax rate.

Has nothing to do with “libbie” anything. Even conservatives campaigned on “bringing the money home” in 2016. This would have helped, there would still likely be outliers in places like the Cayman Islands and Cyprus. But at least the legitimate corporate profits would see the 15% international rate which reduces the incentives to park money in foreign structures. It would mostly leave the criminal money launderers and such using tax havens outside this major international framework. I see no legitimate argument against this other than those who would prefer to keep with the offshore tax shenanigans (and the corp tax attorneys who make their livings in this area).

 

I thought he as attempting to slow down and decrease spending during a recession.

 

That is a different issue from this, this is an international tax agreement.

I’m actually not sure how Manchin can unilaterally stop it, but I assume to “agree” to it as an international deal we’d need to adapt the corp tax code. So effectively it needs to get through reconciliation.

 

Good for Manchin

 

I must admit my understanding of civics is flawed. I would have thought it took a majority of the Senate to kill a something like that. Who knew one man had that kind of power?

 

He has that power because of the 50-50 Senate, and while some conservatives should be on board with something entirely sensible like this, they are surely being whipped hard to 100% vote against it based on anti-tax ideology. It technically is a tax hike (on those companies parking cash in shell companies in jurisdictions where their rate is presently <15%, adding the floor of 15% will raise taxes to that floor globally).

 

There are lots of arguments against the US ratifying compliant tax laws to meet the OECD Pillar II framework. I can come up with two off the top of my head, but there are likely many more. For one, the effective tax rate is a financial statement concept. Working in a definition of the ETR into the US tax law will be complicated when looking at differences between US GAAP, local GAAP, and IFRS. Another issue is tax credits reduce the ETR. US multi-nationals would have reduce their ETR by a tax credit (example R&D), which could result in a top up tax in another jurisdiction. Who gets to collect the top up tax? How do treaties apply? Does the US GILTI regime apply?

On this one, Manchin might be correct to not give his vote to the slim 50+ Harris to pass something through budget reconciliation. Also, with Hungary bolting on this, the EU is similarly in a precarious position without unanimity.

 

It isn't just Manchin, it is every pub senator that is also voting against it. You would think one of them with some common sense would break ranks

 

That’s not the way it works. There are substance requirements and operations in country are subject to tax. The US has anti-inversion rules. The min tax needs to have everyone change their laws or we put US multinationals in a precarious position. The US legal system, IP protections, and educated workforce give us a global advantage. We are letting the rest of the world jump on our backs with these draconian attempts to “level the playing field”. If the world doesn’t like Tech companies because of IP > labor, use a targeted approach. BTW… when are they going to unwind the carried interest rule?

 

This concept of aligning tax regimes and going for more uniformity in accounting principles (both in taxation and in financial disclosure reporting) has been bantered about for decades (probably longer). I remember discussing these concepts academically 30 years ago in a tax accounting courses. (Fortunately I never engaged much with corp taxes at all in the real world, let alone foreign taxes, other than occasionally having to meet with the tax guys to project future budgets).

I have not studied the details of this Yellen proposal, indeed I would leave the in’s and outs to the tax lawyers and tax academics. However similar to the Iran nuclear deal, I tend to think “some deal is better than no deal”. If Manchin is in relatively select company with… Hungary… and Hungary is the European holdout. That isn’t much of a good look as Hungary is a backsliding democracy, and Orbán may have his own corrupt motive (perhaps making Hungary a tax haven, or a destination for money launderers including some Russians).

In either case, I have no idea what Manchin’s motive is on this one. I suspect 99% of Republicans have no idea about the academic issues of global taxation or standards either. They do as their masters tell them. They just view this as a corp tax hike, and to be fair it probably is based on what I understand of it.

 

Classic D badassery: call an R one.

 

Lol... The fed really just wants all companies and corporations to pay the same everywhere on Earth, like one big NWO collective. And they don't want American corporations sending their money off shore.

Easy solution... lower the corporate taxes on all businesses.