October 7, 2004

October 7, 2004 | Commentary on Taxes

An OPEC for Politicians?

At the risk of stating the obvious, the United Nations hasn't been America's friend in recent years.

It has obstructed the war on terrorism. It has honored corrupt dictatorships with seats on its Human Rights Commission. Its budget is riddled with waste and fraud, and the United States pays the lion's share of the tab. And it serves as a platform for anti-American rhetoric -- much of it from governments that receive U.S. foreign aid.

But this situation may be about to get worse. Led by France and Brazil, the United Nations now wants to impose global taxes. At a recent U.N. summit meeting, politicians from more than 100 nations endorsed a $50 billion global tax to finance even more foreign aid. Not surprisingly, the bureaucrats have many different schemes to fleece the world's taxpayers.

One of the most popular ideas is a tax on financial transactions. This would have an especially adverse effect on the United States, which has the world's largest financial system.

Americans probably don't want to pay a tax to the U.N. every time they use their ATM cards, but that would be only the tip of the iceberg. U.N. kleptocrats also are considering a tax on energy use. So if you use your ATM card to get money to fill your car with gas, you might get to pay twice. But don't let this upset you too much, because if you go online to complain to your congressional representative, you could pay another tax -- since taxing Internet usage is another global tax being contemplated by the U.N. crowd.

These ideas are bad enough, but the worst proposal is a scheme endorsed by U.N. Secretary-General Kofi Annan to create an International Tax Organization. This new super-bureaucracy would have vast new powers, including the collection of global taxes. The U.N. report endorsing this proposed bureaucracy even stated that foreign governments should have some ability to tax American workers.

Fortunately, there is some good news. President Bush opposes a new international tax bureaucracy and he has no intention of allowing the U.N. to impose taxes on American citizens. At the recent U.N. summit,
Agriculture Secretary Ann Veneman unambiguously rejected the global tax power-grab, noting that "global taxes are inherently undemocratic." Higher levels of foreign aid aren't the answer, she said: "Economic growth is the long-term solution to hunger and poverty."

Such logic is lost, though, on leaders such as
French President Jacques Chirac -- one of the world's biggest supporters of global taxation.

But why should America accept awful tax policy just to appease the French? The government of France certainly hasn't earned our friendship.
Chirac even threatened the United States at the U.N. summit: "However strong the Americans may be, you cannot in the long run emerge victorious by opposing an idea that is backed by 100 countries and which will probably be approved by 150, creating a new political situation."

President Bush correctly has ignored these thinly veiled French threats. But the threat from the U.N. cannot be so easily dismissed. The United Nations already has a mini-bureaucracy known as the
"ad hoc Committee of Experts on International Cooperation in Tax Matters." This entity, which the U.N. wants to turn into a commission as a mid-way step toward an International Tax Organization, has published a report exploring ways to help foreign governments tax income earned in America.

These ideas are ludicrous. America is attracting jobs and investment from all over the world because our tax burden is lower. This upsets some foreign governments, who argue that the United States is guilty of "harmful tax competition." These high-tax welfare states have even enlisted another left-wing international bureaucracy, the Paris-based Organization for Economic Cooperation and Development, to persecute low-tax nations.

This is the wrong approach. If high-tax nations are worried that investment funds are fleeing to America, they should lower their punitive taxes on saving and investment. If welfare states are worried that talented entrepreneurs are immigrating to America, they should lower their income-tax rates.

Uncompetitive countries such as France should be allowed to keep their terrible tax systems, of course, but they shouldn't try to drag other nations down to their level. Global taxes and an International Tax Organization are both attempts to undermine America's economic advantage by creating a tax cartel -- an OPEC for politicians, if you will. President Bush is right to reject them.

Daniel J. Mitchell is the McKenna fellow in political economy at  The Heritage Foundation.

About the Author

Daniel J. Mitchell, Ph.D. McKenna Senior Fellow in Political Economy

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