GOP bill would pull US out of global tax deal

A group of House Republican lawmakers has introduced legislation to end U.S. involvement in the Organization for Economic Cooperation and Development's framework for global taxation in response to an executive order from President Trump.

On Monday, after the inauguration, Trump signed an executive order declaring the "Global Tax Deal has no force or effect in the United States." The Biden administration, especially former Treasury Secretary Janet Yellen, had been actively negotiating with the OECD on various aspects of the global tax framework, often referred to as Pillar One and Pillar Two, but it was never implemented in the U.S. due to opposition from Republicans and multinational corporations. Now that Republicans are back in control of Congress and the White House, they are looking to make it official. 

House Ways and Means Committee chairman Jason Smith, R-Missouri, and all 25 Republicans on the tax-writing committee introduced the Defending American Jobs and Investment Act (H.R. 591). 

"Congressional Republicans made it clear as soon as the Biden administration initiated its negotiations with the OECD that the United States would never be party to a global tax surrender," Smith said in a statement Wednesday. "Now with President Trump in the White House, we finally have a leader who will defend American workers and businesses against economic attacks by other nations."

"One of the Trump administration's first actions was to reject the OECD framework that would have destroyed U.S. jobs, forfeited an estimated $120 billion in tax revenues, and enhanced China's competitive advantage," he continued. "The Defending American Jobs and Investment Act will ensure that President Trump has every tool at his disposal to push back against any foreign country that seeks to undermine America's economic vitality or unfairly target our workers and businesses."

The bill would require the Treasury Department to identify extraterritorial taxes and discriminatory taxes enacted by foreign countries that attack U.S. businesses, such as the Undertaxed Profits Rule surtax. After the foreign taxes have been identified, the tax rates on U.S. income of wealthy investors and corporations in those foreign countries would increase by five percentage points each year for four years, after which the tax rates would remain elevated by 20 percentage points while the unfair taxes are in effect.

The reciprocal tax would cease to apply after a foreign country repeals its extraterritorial and discriminatory taxes, and would remain dormant as long as countries avoid any unfair taxes on U.S. businesses and workers. Several countries have already made the decision to exclude the UTPR surtax from their implementation of the OECD global minimum tax.

The Joint Committee on Taxation issued an analysis in 2023 finding that the U.S. could potentially lose over $120 billion in tax revenues under the OECD's global minimum tax framework, also known as Pillar Two. In 2023, Smith led a delegation of Ways and Means Committee members to meet with OECD, French and German leaders to convey the message that Congress would never approve of ceding the U.S.'s taxing authority to foreign governments. Smith introduced an earlier version of the Defending American Jobs and Investment Act in 2023.

The executive order is likely to set back efforts to implement the OECD global tax framework. "It's a very disturbing development," said Bharat Ramamurti, a former deputy director of the White House's National Economic Council during the Biden administration and an advisor for Accountable.US, during a webinar discussing a new report on the top 10 corporations benefiting from the Tax Cuts and Jobs Act. "America is losing lots of tax revenue from corporations because it's very easy for those companies to pretend like they operate in Ireland or some of these other countries that have low taxes and avoid the obligations they have to America. By creating a global system to essentially make sure that corporations can't play these games and shift revenue away from the United States, and by rescinding that, you're basically saying the interests of Apple and Meta and big corporations that have the ability to be very flexible with their profits are superior to that of Americans. Every dollar in tax revenue that isn't coming in from corporations means either an additional dollar of borrowing or more tax burden on middle class families. With this order on top of everything else, it's really clear where Trump's interests lie."