We cannot tax ourselves into prosperity, but that is exactly what some in Congress think we can and should do. While talks around infrastructure and the “Build Back Better Plan” should bring significant investment to communities throughout West Virginia, ideas for how to pay for these packages are concerning.
Fortunately, there are lawmakers who are taking a slow-and-steady approach to these discussions. Rather than diving headfirst into new taxes and spending, these lawmakers are instead taking a thoughtful look at just how new taxes would be implemented and how they would affect American workers, businesses and communities. But as these talks drag on, so does the threat of higher taxes.
As the West Virginia Commissioner of Agriculture, former small business owner and farmer, I am always wary of any potential tax increases. Not only because of the consequences that would befall farms, small businesses and the agricultural industry, but also because of the negative ramifications for our economy. West Virginians worked hard to keep our state on track during the pandemic, and we cannot afford to be bogged down by extra tax payments at a time of economic volatility.
It is no secret that while West Virginia communities were hit hard by the pandemic, our economy was able to weather the storm. In 2021, our state budget had a surplus of over $400 million in revenue. However, our strong economic performance was due in part to the proliferation of startups and other small businesses, as well as the strength of the agricultural industry and other essential sectors. Increasing taxes on these industries will only set us back, rather than set us up for the future.
One tax increase that is under consideration is the Global Intangible Low Tax Income (GILTI) rate, which places a fee upon profits made abroad by American companies. Currently, the United States is the only country that taxes the global income of its multinationals. At its current figure of 10.5%, GILTI has reduced the rate of offshoring money and kept earnings here at home. But raising this fee would add more financial obligations to essential industries and reduce American competitiveness.
It should also be noted that the plan to increase GILTI includes aligning it with a global minimum tax that is currently being developed by the Organization for Economic Co-operation and Development (OCED), an intergovernmental economic group of 38 member countries, including the United States. It is important for American competitiveness, and jobs, that any changes to GILTI do not go further or faster than the OECD process.
In the current version of the revised reconciliation bill, changes to GILTI would not take effect until 2023. But it is more than likely we will not know which OECD countries have implemented their own GILTI-style global minimum tax until at least 2024. That means that rivals like China could use the OECD process to gain a short, or even long, term competitive advantage over American companies. This is especially worrisome after we fought so hard through trade negotiations to even the playing field for the American farmer and other businesses. China continues to leverage unfair advantages for their corporations which has resulted in Chinese companies surpassing the number of American businesses on the Fortune 500.
Any potential tax increase is concerning for our farmers, especially as they experience supply chain issues, rising costs and uncertainty within regulations. It should also be noted that as part of the push to increase corporate income taxes, lawmakers are also hoping to make significant changes to capital gains and estate taxes. These changes would undoubtedly affect farmers across West Virginia and impede their ability to keep their homesteads within their family.
Now, more than ever, we need to make policy choices that put workers and communities first. The proposal to increase GILTI and make changes to other tax provisions does not boost American competitiveness nor benefit West Virginia’s workers, businesses or economy, but rather hinders them. We cannot let Washington bureaucrats put us back to square one through bad policy decisions.
Kent A. Leonhardt
West Virginia Commissioner of Agriculture
