A Global Minimum Tax Means Price Fixing

We punish anticompetitive behavior in the private sector but permit it in the public sector

Letter to The WSJ.

"Kevin Brady’s “An End to Double Taxation” (op-ed, Feb. 12) is right to applaud the U.S. exiting the global minimum tax on companies. The U.S. should go even further, fostering agreements that institute antitrust enforcement for governments, not only companies.

The U.S. Sherman Act of 1890 made it illegal for competing companies to engage in horizontal price fixing, potentially punishable by prison time. Private antitrust enforcement occurs even though customers can voluntarily not buy at the higher prices upon which they’ve colluded.

Yet price fixing among governments, like that of Pillar 2 (the Organization for Economic Cooperation and Development’s global minimum tax proposal), is legal and common. In contrast to the private sector, government collusion is legal even though customers are mandated to pay the colluded-upon prices. Citizens can’t opt out of the national taxes charged. It’s a striking contrast: In the private sector, the price-fixers may face jail time; in the public sector, the customers not paying the publicly fixed prices do.

Bureaucrats including Janet Yellen, Joe Biden’s Treasury secretary, advocate for Pillar 2. They justify government collusion to avoid a “race to the bottom” in taxation. I’m sure private companies would also prefer to avoid competition in pricing their goods and services, but for consumers, that race is desirable. Should companies colluding on price-fixing be allowed to use the Yellen defense?

Only self-serving bureaucrats view rising after-tax incomes as a negative. It’s not a race to the bottom; it’s healthy price competition. Such tax competition among U.S. states protects local taxpayers from California’s and New York’s levels of taxation and cuts individual and corporate income taxes. Ireland’s lower tax serves the same competitive role in Europe. ​

One may argue that other foreign governments charging higher taxes benefits the U.S. if we can opt out unilaterally. That’s short-sighted. If other countries have high taxes, wealthy customers abroad will have less money to spend on buying American goods and services.

The U.S. should take the lead in pushing for more price competition, not only in the private sector but also in the public one.

Tomas J. Philipson

The University of Chicago" 

America’s Trade Deficit Is a Sign of Strength

A country runs trade deficits whenever it attracts more global capital than it repels

Letter to The WSJ.

"I hope that President Trump will read Joseph Sternberg’s column describing the economic doldrums inflicted on Europe by the European Union’s economic interventions (“Hurrah! Europe Is Fighting Over Economic Policy,” Political Economics, Feb. 13). Should he do so, the president might rethink his assertion that the EU has been “screwing us on trade”—a faulty conclusion that Mr. Trump grounds on the fact that the EU has consistently run annual trade surpluses with the U.S.

To describe real per capita gross domestic product growth in the EU as strong since 2009 would be generous and far from accurate; it has hardly grown. In the U.S., by contrast, real per capita GDP rose over these same years by about 32%. And yet in each of these years the U.S. ran a trade deficit with the EU, as well as with the rest of the world, while the EU, with the exception of 2022, ran a trade surplus with the rest of the world.

These data point to a reality that Mr. Trump refuses to acknowledge—namely, a country or region runs trade deficits whenever it attracts more global capital than it repels, and it runs trade surpluses whenever it repels more capital than it attracts. The EU consistently runs trade surpluses and the U.S. trade deficits not because the EU is cheating or besting America at trade but rather because the EU’s growth-stifling policies repel global investors while America’s more market-oriented policies are attractive to investors.

Mr. Trump’s obsession with putting an end to U.S. trade deficits will make America repel global investors.

Donald J. Boudreaux

George Mason University" 

Newsom’s Climate Policy Backfires

As refineries close, California is importing more foreign oil

WSJ editorial. Excerpts: 

"California has lost roughly a quarter of its refinery capacity since Mr. Newsom became Governor in 2019."

"the state’s burdensome regulations—e.g., its cap-and-trade program, low-carbon fuel standard and threatened tax on “excessive” gross margins—make it uneconomic to operate older facilities."

"California’s refined fuel imports have increased by more than 30% compared to late 2019"

"the state’s anti-fossil fuel regulations is higher CO2 emissions from all that transport to get the oil to California."

"Californians are paying $1.67 a gallon more for gasoline than the national average." 

The Economics of Illegal Drugs

As a teenager I saw the war on drugs up close. Then I studied it as an economist and saw it differently

By Roland Fryer. Excerpts:

"When demand for a drug is inelastic—meaning users don’t reduce consumption much even as prices rise—supply-side enforcement doesn’t starve traffickers. It enriches them."

"When enforcement raises costs, the street price goes up. If demand is elastic, consumers cut back, total spending falls, and less money flows to traffickers. But if demand is inelastic, as decades of evidence suggest it is for hard drugs, consumers cut back only modestly, total spending increases, and more money flows into the drug trade."

"legalize and tax. When demand is sufficiently inelastic, an excise tax on a legalized drug . . . reduces consumption more than any “war” on the drug. With legalization, producers prefer paying the tax to going underground, and enforcement costs collapse."

"in the 1980s and ’90s. With the rise of crack, homicide rates doubled among black males 14 to 17 while fetal deaths among blacks sharply increased. Yet even as crack use persisted at 60% to 75% of its peak level through 2000, the violence almost disappeared. The initial violence was driven not by drug use but by the struggle to establish property rights in illegal markets. Once those rights were established and crack prices fell, the violence subsided."

"Portugal and Switzerland represent partial steps: decriminalizing use while keeping supply illegal, or medicalizing supply for the most dependent users."

"Portugal decriminalized all drugs in 2001 and redirected resources to treatment. Annual drug-related deaths fell from 76 to 16 by 2012; HIV infections among users fell more than 90%; drug use didn’t spike."

"Switzerland began prescribing pharmaceutical-grade heroin to its hardest cases in the 1990s. Muggings by participants dropped 70%; opioid-related criminal cases nationally declined from 20,000 a year to 5,000."

"cocaine retails at 262 times its farm gate price—a markup attributable to the risk premium of illegality."

"addicts respond far more to permanent price changes than to temporary ones."

"In November 2025, the Congressional Budget Office’s director testified that he had no evidence the interdiction campaign has affected drug use or prices in the U.S. A classic RAND Corp. study found decades ago that treatment is 23 times as cost-effective as source-country control and 10 times as cost-effective as interdiction."