U.S. Treasury Secretary Janet Yellen called on Monday for the imposition of a minimum global corporate income tax to keep American companies from moving overseas as the Biden administration plans to raises taxes to cover its trillion-dollar spending packages.
"Competitiveness is about more than how U.S.-headquartered companies fare against other companies in global merger and acquisition bids," Yellen said. "It is about making sure that governments have stable tax systems that raise sufficient revenue to invest in essential public goods."
Yellen made the comments via livestream to the Chicago Council on Global Affairs and called for the tax to be implemented by G20 nations, which includes the European Union and the world's 19 other largest economies.
The global tax would aim to keep the American economy competitive if President Biden succeeds in raising the corporate tax from 21% to 28%.
"Together we can use a global minimum tax to make sure the global economy thrives based on a more level playing field in the taxation of multinational corporations, and spurs innovation, growth and prosperity," said Yellen.
Republicans such as Sen. Pat Toomey (R-PA) criticized Yellen's proposal, saying it would not make much progress in other nations.
"Spoiler alert: This effort will likely fail and even if there is some sort of agreement, it will be non-binding because it is not a treaty," he said.
Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics, said that countries will likely act in their own self interest and find a way around such a tax to attract businesses – especially China and Russia.
"China will pay no attention to the [Organization for Economic Co-operation and Development] global minimum," he said. "Neither will Russia and many other countries."