House Republicans introduced legislation Thursday aiming to prevent the U.S. from participating in the multinational tax changes the Biden administration helped negotiate with the Organization for Economic Cooperation and Development.
House Ways and Means Committee Chairman Jason Smith, R-Missouri, along with the rest of the Republicans on the tax-writing committee, introduced H.R. 3665, the Defending American Jobs and Investment Act, which would create a reciprocal tax applicable to any foreign country that imposes taxes on U.S. businesses and workers under the OECD's global tax agreement.
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The reciprocal tax would cease to apply after a foreign country repeals its extraterritorial taxes, and would remain dormant as long as countries avoid such taxes on U.S. businesses and workers. Several countries have already made the decision to exclude the undertaxed profits rule surtax from their implementation of the OECD global minimum tax, Smith's office noted.
"This bill sends a clear warning to any nation tempted to exploit the success of our workers and businesses for its own gain," Smith said in a statement. "Republicans are taking action where the Biden Administration has failed — in standing up for the interests of American workers and families. We will not allow a bad deal negotiated by the Biden White House to enable foreign governments to steal away Americans' jobs and opportunity, and we will not stand idly by while other countries use the OECD global tax deal to extract over $120 billion in U.S. tax revenue over the next decade."
At least one Senate Republican is supporting the legislation. "I support Chairman Smith and Ways and Means Republicans' efforts to pursue measures to dissuade foreign countries from taxing U.S. companies and collecting U.S. revenue in a manner inconsistent with U.S. law and our bilateral tax treaties," Sen. Mike Crapo, R-Idaho, the ranking Republican on the Senate Finance Committee, said in a statement Thursday. "If other countries proceed with implementing extraterritorial or discriminatory taxes, Congress will be forced to pursue remedial measures to protect U.S. interests. I will continue to work with my Republican colleagues on the most effective options to protect American sovereignty over our tax policies. To ensure those remedial measures never go into effect, I strongly encourage foreign-based companies with a U.S. presence to actively petition their foreign governments to turn off those extraterritorial and discriminatory taxes."
His counterpart on the Democratic side of the aisle objected to the legislation.
"In 2017 Republicans passed a tax law that created new incentives to ship jobs and park profits overseas, and they have resisted every effort to ensure that multinational corporations pay a fair share," said Senate Finance Committee Chair Ron Wyden, D-Oregon, in a statement. "It's now abundantly clear that the world is moving forward with international reforms aimed at stopping the race to the bottom on corporate taxes, but nonetheless, Republicans are attempting to prevent that from happening. The most likely outcomes of this approach are all bad for American businesses and workers. In the near term, merely introducing this bill means the Treasury Department will have a much harder time advocating for American interests in negotiations with other countries. In the long term, the U.S. would lose out on investments and jobs as a result of the new taxes House Republicans are proposing, which are unlikely to prevent other countries from moving forward with international tax reforms."
