Janet Yellen Is Sticking Her Nose Where It Doesn’t Belong

Andy Snyder|May 26, 2021

Janet Yellen has shown her true colors.

Our old crush just revealed she’s not in it for you or your neighbor. She’s not looking out for the free market or its wealth-generating ways.

Nope… these days, she’s in it for Uncle Sam.

Yellen and her tax collector pals are sticking their noses where they don’t belong. As the head of America’s Treasury – and therefore the IRS – Yellen has plenty to work with within our domestic code.

And yet, she seems more concerned with the tax policies of other nations.

As you may have heard, she’s calling for a global minimum corporate tax.

The world must work together, she reckons, to ensure the greedy folks who put their money on the line don’t get too much of it in return.

A Race Worth Losing

A few days ago, she said something that shows how she really thinks.

She said the free market system is no more than a “race to the bottom.”

She used those words to describe the corporate tax scene around the globe. Competing to bring more businesses within their borders, countries have been cutting their tax rates, she claimed.

Ireland, for example, taxes its businesses at 12.5%.

The U.K., on the other hand, has a rate of 19%… but it’s going to 25% in two years.

America’s current corporate tax rate is 21%. Biden has pledged to raise it to 28%, much closer to France’s rate, which tops out at 31%.

Those thieves.

Companies with the luxury of such choices will be able to choose between one tax home and another that charges twice as much.

The choice should be clear. As we so often say… money goes where money is treated best.

Good for Ireland.

But Yellen says it’s unfair.

This sort of competition, she says, has hurt the countries that have been forced to spend massively during the COVID-19 crisis.

She failed to mention that they’ve been overspending for generations. Last year was simply the “Ah… it doesn’t even matter anymore” phase.

“It is imperative to work multilaterally to end the pressures of corporate tax competition and corporate tax base erosion,” Yellen’s team said in a statement released last week. “Treasury underscored that 15% is a floor and that discussions should continue to be ambitious and push that rate higher.”

And what if a country does what’s right and pushes against the global tide? Will Washington soon sanction Ireland for its too-low rates?

Simple answer… youbetcha.

A Better Argument

We say the folks in Washington have it backward.

They shouldn’t be measuring themselves by how much money they pick from the pockets of their citizens. They should be measuring themselves by how much (or rather, how little) they spend – the more efficient the purse, the better.

Of course, by those numbers, things are quite sad.

The United States spends $21,000 per citizen each year (and please note, these numbers were recorded before the huge COVID-19 spending spike).

The U.K. spends $17,202.

But what’s this? Ireland, with its “too low” corporate tax rate, spends $17,209 per citizen – seven bucks more than its high-tax neighbor.

Go figure… Its lower tax rate attracts more businesses… which leads to more revenue… which leads to more spending per citizen.

As usual, the free market wins. That’s the “race to the bottom” Yellen is fighting against.

Silly, isn’t it?

But free markets aren’t all that popular in the land of the free these days. Instead of getting the log out of her eye, Yellen would rather flick the splinter into someone else’s.

All told, the current numbers being tossed around would put an extra $100 billion in the pockets of global governments each year.

That’s a lot of money to the businesses that sign paychecks each week. A hundred billion bucks can buy a lot of groceries and pay a lot of rent checks.

But for Washington and its counterparts… $100 billion hardly moves the needle.

Global sovereign debt now stands at $92 trillion. The money Yellen is looking to raise doesn’t even cover the interest.

It’s not time to end the race to the bottom.

It’s time to stop spending other people’s money.

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