The Biden Administration has declared its support for a “global minimum” corporate tax rate of 15%. So long as this is merely a declared goal, it’s a legal nothing, worth no more than the paper it’s written on. It is worth asking if it could ever be anything more than that? Absent an amendment to the U.S. Constitution, probably not. If we have a “living constitution,” meaning that the government reinterprets the Constitution to mean whatever is useful to secure the latest fashion in policy-making, then, of course, what follows is irrelevant. But if the Constitution is a document, ratified and amended by the people of the several states, that has discernable meaning that is consistent over time, and if its meaning can only be transformed via amendment, then it’s worth considering what the Constitution says about taxes.
According to Article I, section 7, of the U.S. Constitution, “All Bills for raising Revenue shall originate in the House of Representatives.” That language was part of the Connecticut Compromise between the larger and smaller states. The House of Representatives would be proportionate to population and the Senate would be based upon the equality of states. The Compromise was a way of ensuring that the larger states did not gang up on the smaller, less powerful ones. As taxes ought to be made in proportion to population (or wealth, but they had no good way to do that, so they used population) the House of Representatives, being the representative of population, was accorded the right to originate all tax bills.
What does that mean for this case of a global tax rate backed by a treaty? Consider a question from the 1790s. The relationship of the treaty power to the tax power came up when Congress was debating the Jay Treaty. According to Article II, Section 2, all treaties are made by the President with the “advice and consent” of the Senate. And a treaty only becomes binding when “two thirds of the Senators present concur.” What if a treaty requires revenue to be spent? Does the treaty power supersede the provision in Article I, section 7? James Madison, then a leader in the House of Representatives, argued that a treaty could not spend money without the consent of the House of Representatives. It would only require a bare majority of the House to approve, however.
In his speech on the matter, (I quote from Lance Banning’s fine collection Liberty and Order, available at Liberty Fund’s Online Library of Liberty) Madison said
If by treaty, therefore, as paramount to the legislative power, the President and Senate can regulate trade; they can also declare war; they can raise armies to carry on war; and they can procure money to support armies. These powers, however different in their nature or importance, are on the same footing in the Constitution and must share the same fate.
. . . The Constitution of the U. States is a Constitution of limitations and checks. The powers given up by the people for the purposes of government had been divided into two great classes. One of these formed the state governments, and the other the federal government. The powers of the government had been further divided into three great departments; and the legislative department again subdivided into two independent branches. Around each of these portions of power were seen, also, exceptions and qualifications, as additional guards against the abuses to which power is liable. With a view to this policy of the Constitution, it could not be unreasonable, if the clauses under discussion were thought doubtful, to lean towards a construction that would limit and control the treaty-making power, rather than towards one that would make it omnipotent.
Note Madison’s reasoning. The U.S. has “a Constitution of limitations and checks” that divides power “into three great departments” and “around each of these portions of power were seen, also, exceptions and qualifications.” In Madison’s view it would be rendering those checks and qualifications moot by reading the treaty power as an unlimited one. Hence, any treaty that requires money to be spent must also gain the assent of a majority of the House before that spending provision becomes law. President Washington disagreed with Madison here. (As some Progressives nowadays claim that “originalism” is a late invention, it’s worth noting that Washington points to both the Constitutional Convention and the ratifying conventions as key sources for discerning the meaning of the text the people ratified). In 1796, however, Washington lost the argument, and since Madison’s day his reasoning has carried the field.
In this case, there was serious disagreement in the founding generation about how to interpret the Constitution. How, then, ought one to read the Constitution? Does disagreement among the founders void originalism? No. But it does teach us some humility. Perhaps the best way to think through such questions is teleologically. What interpretation is most consistent with the underlying logic of the Constitution? Which one makes more sense of the document as a whole? In the case of treaties spending money, Madison’s view has generally carried the field. When thinking through such questions one must answer such questions as ‘what is a constitution’ and ‘what is a reasonable mode of constitutional interpretation’ in a manner consistent with the founding era’s answers to such questions or one will radically distort the meaning of the text. The question of a global tax is, however, not a close call.
Can the U.S. bind itself to a global minimum tax? With a constitutional amendment, of course, but not otherwise. Note that Madison’s reasoning in 1796 was only about spending money, and not about tax, although the Jay Treaty did give Great Britain what we now call “Most Favored Nation” status. That status, although it does have to do with tariff rates, is also about the particular rate for a particular country, and not about tariff rates in general. But if the treaty power is, presumptively, limited even in the case of spending, so much more ought we to conclude that the U.S. government has no right completely to delegate the right to set tax rates via a treaty. It is hard, probably impossible, to reconcile a permanent abdication of American sovereignty via the treaty power with the very idea of constitutional government itself.
One final word is probably in order here. A treaty needs to have the support of two-thirds of the Senate to be binding. It is very unlikely that two-thirds of the U.S. Senate will agree to such a global tax regime anytime soon. But an administration might try to follow the precedent the Obama Administration set when it called the Iran treaty an “agreement,” not requiring the assent of two-thirds of the Senate. One can imagine an administration trying to ram a global tax through with a bare majority, following the “living constitution” logic. But if, per settled precedent going back to 1796, a treaty cannot legally take away from the Congress the Constitutional authority to spend money authorized in a treaty, not to mention set tax rates, then, surely, something less than a treaty cannot do so.