International bureaucrats seek control of U.S. tax law

Across America

Bush Administration Needs to Hear From Public

Should bureaucrats in Paris have any control over American tax policy? Most Americans would say no, but the Clinton Administration supported a campaign to let the Organization for Economic Cooperation and Development (OECD) dictate tax policy for the entire world.

The OECD is an international organization with 30 member states, including most nations in Europe and North America, plus Japan, Australia and New Zealand.

Specifically, the OECD argues that it is unfair for low-tax nations to lure investors and entrepreneurs away from high-- tax countries, and the Paris-based bureaucracy launched a project to stop so-called harmful tax competition.

This initiative is a direct threat to America's economic interests. The United States is a low-tax country by industrial-world standards and our favorable tax treatment of foreign investment has made America a magnet for world capital. Needless to say, any effort to hinder or restrict tax competition between nations would undermine our-competitive advantage.

Thankfully, there is still time to pull the plug on the OECD's misguided initiative. The United States is the biggest and most influential member of the OECD, and if we refuse to participate in any global effort to undermine the sovereignty of low-tax countries, the entire effort will unravel. And with a new President in office-one who wants lower taxes and believes in competition-it would seem the OECD's effort to create an OPEC for politicians is doomed to failure.

Threatens Sovereignty

But it is much too early to declare victory. The career bureaucrats in the Treasury Department and the IRS are desperately fighting to keep the Clinton policy in place. They are telling Treasury Secretary Paul O'Neill that the OECD proposal will make it easier to collect taxes by forcing all countries to repeal financial privacy laws.

The key question, of course, is whether O'Neill will do the right thing.

On one side of the issue are tax collectors and politicians from high-tax nations such as France. They like the OECD proposal, and they are pressuring the Treasury secretary to continue Bill Clinton's policy.

On the other side are taxpayers, free-market groups and conservative leaders. They argue that tax competition should be celebrated rather than persecuted, and they warn that the OECD initiative will be used as a weapon against America.

Needless to say, this should be an easy decision. The American people did not elect George Bush to preserve Bill Clinton's policies. Indeed, there is every reason to believe that President Bush understands that supply-side tax policies will make the United States more competitive. His plan to lower tax rates and repeal the death tax will encourage over-taxed Europeans to shift more savings and investment to America.

There is a danger, however, that the White House will not have the time or resources to focus on this issue. For obvious reasons, the President is devoting a large percentage of his time to the tax cut bill now before Congress. And there are many other critical issues-everything from missile defense to Social Security reform-that will require his attention in the coming months.

The career bureaucrats would like this issue to remain on the back burner. That way, they can quietly manipulate Secretary O'Neill, feeding him selective and biased information so that he sides with France and other high-tax nations.

To prevent this disastrous outcome, the conservative movement needs to mobilize against the OECD. A number of key lawmakers, including House Majority Leader Dick Armey (Tex.) and Senate Majority Whip Don Nickles (Okla.), already have jumped into the battle. They have sent strongly worded letters to the Treasury Department condemning the OECD's assault against tax competition, financial privacy, and fiscal sovereignty. Similar letters have been sent by Sen. Jesse Helms (R.-- N.C.), Sen. Judd Gregg (R.-N.H.), Rep. Sam Johnson (R.-Tex.) and Rep. Tom Reynolds (R.-N.Y)

Important conservative leaders also have made their opinions known. Grover Norquist of Americans for Tax Reform and Steve Moore of the Club for Growth have registered their strong opposition to the OECD, and Walter Williams has blasted the OECD tax cartel in his syndicated column. Another important development is the work of the Center for Freedom and Prosperity. A relatively new organization, the center is coordinating the fight for tax competition and its website, www.freedomandprosperity.org, is the clearinghouse for information on the issue.

But much more needs to be done. If this remains an inside-the-beltway issue, the paper-pushers at the IRS and Treasury Department could win. This would be a catastrophic defeat.

The OECD, for instance, wants to criminalize territorial tax systems. This may sound arcane, but it would mean that America could never implement a flat tax or national sales tax. It would also mean a dramatic reduction in investment since the United States would be compelled to help other governments collect taxes on income that foreigners earn in America.

The OECD cartel is bad tax policy and bad economic policy. It is an attack on sovereignty and privacy, and it is a threat to civil liberties and the rule of law. It makes sense for a basket-case nation such as France to support the OECD, but it would be downright nutty for the United States to surrender our competitive advantage to an international bureaucracy. Conservatives should warn the administration that this issue demands attention.

BY DANIEL J. MITCHELL

Mr. Mitchell is McKenna senior fellow in political economy in the Thomas Roe Institute for economic policy studies at the Heritage Foundation.

Copyright Human Events Publishing, Inc. Mar 12, 2001
Provided by ProQuest Information and Learning Company. All rights Reserved