WILL WTO OR CONGRESS RULE?Commentary by J. Bradley JansenMarch 20, 2002Last week we witnessed a mixed blessing: the World Trade Organization startedlording over us and the Republican leadership in Congress signaled their intentionto stand up for America. Some of our European trading partners, most notably theFrench, aim to use our membership in this global trading body to submit us totheir worldview.The WTO’s Appellate Panel ruled that the U.S. approach to taxing Foreign SalesCorporations is an “illegal” subsidy. Let’s be fair. The U.S. does use our taxdollars to promote exports, um, subsidize, some of our large corporations. Theseexpenditures are corporate welfare, plain and simple. If the Bush Administrationwere serious about fiscal discipline and basic fairness, we would defund theExport-Import Bank, the Overseas Private Investment Corporation, the TradeDevelopment Agency, our Market Access Program, the International Monetary Fund andscores of similar programs. There are even parts of the tax code that permit“refundable” tax credits whereby someone can get back from the government morethan they paid in taxes.With all of the good reasons to complain about our tax code’s treatment ofcompanies’ global activities, the WTO got this one wrong. What they call asubsidy on exports amounts to nothing more than avoiding double taxation so thatthe U.S. credits companies for their exportable goods—which the Europeans, forexample, then tax.Our corporate taxes are already too high, and we must note that the U.S. taxesincome on a worldwide basis. This system of taxation is needlessly complex, is adetriment to the free flow of goods and services and needs to be addressed.“My hair bristles on the back of my neck when I have Europeans tell us how to runour government,” House Speaker Dennis Hastert was reported to have said. “Wefought a revolution, you know, several years ago to make sure that we could havesome independence, and when they try to manipulate how we run our country and howwe tax our people, to give them an economic advantage in the world, I think thisis unacceptable.”This month’s Cato Institute Tax & Budget Bulletin lists the Top Ten CivilLiberties Abuses of the Income Tax. The fifth point is the “Lack of FinancialPrivacy. The broad-based income tax necessitates a large invasion of financialprivacy that a low-rate consumption-based tax could avoid. The IRS regularlygains access to a myriad of personal records, such as mortgage records, creditcard data, phone records, banking and investment records, real propertytransaction data, and personal correspondence. This broad IRS authority to obtainrecords without court supervision has been referred to by the Supreme Court[United States v. Powell (1964] as ‘a power of inquisition.’”In addition to the problems with high tax rates, needless complexity (anyone forForbes’ flat tax now?), and infringement on our civil liberties, now we have tocontend with encroachments on our sovereignty by the WTO. It is not only timelybut telling that we consider taxes to be not only an economic issue but an issuewith broader ramifications.Analysts of the WTO decision have given the U.S. three main options. The easiestwould be to simply repeal the offending “tax break” and raise corporate taxes byabout $4 billion a year. Another option would be to simply pay off the Europeansby a similar amount but that might seem like the extortion it amounts to. We
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