Treasury Secretary Yellen’s minimum global corporate tax is not yet global law but soon will be. The U.S. and Western European Governments and Central Banks have marched in lock step since 2008’s Financial Crisis. A decade-plus of record fiscal spending, accommodative monetary policy (a Keynesian’s dream) has led to record, expanding fiscal deficits that will not be remedied by tax increases. Nonetheless, Yellen and her counterparts across Western Europe share a big Government philosophy and will likely pass a minimum global corporate tax. This will make it more difficult for companies to shield profits by scaling operations in low-cost geographies simply because there will be fewer low-cost geographies. There will be two primary outcomes for U.S. companies. 1.) Lower post-tax earnings; 2.) Large global companies will work to scale operations in countries such as China where A.) on the ground personnel is less expensive, and B.) the local government is not likely to participate in Yellen’s global tax effort (but will take equity stakes which will make for interesting political theater).
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