By JOSEPH STIGLITZ*

Donald Trump is turning America into a tax haven, continuing to dismantle safeguards and fuel inequality through global deregulation

1.

Donald Trump is rapidly transforming the United States into the largest tax haven in history. Just look at four actions: (i) the Treasury Department’s decision to withdraw from the transparency regime that shares the real identities of company owners; (ii) the administration’s withdrawal from negotiations to establish a United Nations Convention on International Tax Cooperation; (iii) the refusal to enforce the Foreign Corrupt Practices Act; (iv) the massive deregulation of cryptocurrencies.

This appears to be part of a broader strategy to undermine 250 years of history of upholding institutional safeguards. The Trump administration has violated international treaties, ignored conflicts of interest, dismantled checks and balances, and misappropriated funds allocated by Congress. The administration no longer debates policy, but instead tramples on the rule of law.

But Donald Trump loves one type of tax: import tariffs. He seems to believe that foreigners will foot the bill he creates, thereby providing funds to cut taxes for billionaires. He also seems to believe that tariffs will eliminate trade deficits and bring manufacturing back to the United States. Never mind that the tariffs are actually paid by importers, thus raising domestic prices, and are being imposed at the worst possible time, when the United States is reeling from an inflationary episode.

Furthermore, basic macroeconomics shows that multilateral trade deficits reflect the gap between domestic savings and domestic investment. Donald Trump’s tax cuts for billionaires will widen this gap, since deficits reduce domestic national savings. It may seem ironic, but policies that cut taxes for billionaires and corporations tend to increase the trade deficit.

Ever since Ronald Reagan, conservatives have argued that tax cuts pay for themselves by boosting economic growth. But that didn’t work under Reagan; it didn’t work under Donald Trump’s first term either. Empirical research confirms that tax cuts for the wealthy have no measurable impact on economic growth or unemployment, but they do increase income inequality immediately and persistently. The proposed extension of the 2017 Tax Cuts and Jobs Act—which included the largest corporate tax cuts in U.S. history—will add an estimated $37 trillion to the U.S. national debt over the next 30 years without delivering the economic boost it promised.

2.

Donald Trump is also worsening the trade deficit at the microeconomic level. The US has become a service economy. Its largest exports include tourism, education and health care. But Trump has systematically undermined each of them. What tourist, student or patient would want to come to the US knowing they could be arbitrarily detained and held for weeks? The undermining of America’s leading educational institutions, the arbitrary cancellation of student visas and the defunding of scientific research have cast a deep pall over these critical sectors.

Donald Trump’s strategically flawed approach is already backfiring. China is one of the United States’ largest trading partners; as we know, the United States relies on critical imports from China. Knowing this, it has already retaliated. Fears of “stagflation”—higher inflation combined with stagnant growth—have already hit stock and bond markets. And this is just the beginning.

Thanks to Elon Musk’s Department of Government Efficiency, tax revenues could plunge by more than 10% this year due to weakened enforcement. A reduction of about 50.000 employees in the department would likely result in $2,4 trillion in lost revenue over the next decade, compared with a projected $637 billion increase under the Inflation Reduction Act’s provisions aimed at increasing the agency’s workforce. The agenda is clear: not just lower tax rates for the wealthy, but weaker enforcement as well.

In a world where capital and wealthy individuals can move freely across borders, international cooperation is the only way for governments to ensure that multinational corporations and the ultra-rich are taxed fairly. In this context, stopping enforcement of taxable property data collection, tolerating anonymity-enhancing cryptocurrency markets, abandoning the process of concluding a new UN tax convention, and abandoning a global minimum tax all reveal a deliberate pattern: dismantling multilateral frameworks designed to combat tax evasion and money laundering. The “pause” on enforcement of the Foreign Corrupt Practices Act indicates that the US no longer even cares about bribery and graft.

What we are witnessing is an apparent attempt by Donald Trump, Elon Musk and their billionaire cronies to forge a kind of capitalism modeled after the lawless zones of the world. offshore. This is not just a tax revolt; it is an unqualified attack on any law that threatens the extreme accumulation of wealth and power.

Nowhere is this more evident than in the adoption of crypto. The booming cryptocurrency market, online casinos, and loosely regulated gambling platforms are fueling the global illicit economy. Under Donald Trump, the Treasury Department has lifted sanctions and regulations on platforms that hide transactions made. Trump even signed an executive order to establish a “strategic cryptocurrency reserve” and held the first White House crypto summit. The U.S. Senate followed suit, killing a provision that would have required cryptocurrency platforms to identify and report users.

Donald Trump has issued a controversial meme coin; he may soon release a video game based on the game known as “Monopoly”; he has installed a crypto advocate as head of the Securities and Exchange Commission. Paul Atkins is a member of a policy group that advocates for crypto assets and non-bank financial systems.

Cryptocurrency platforms have one central feature: the confidentiality of transactions that take place there. The current economic system is based on good currencies, such as the dollar, yen, euro and others. There are efficient trading platforms for purchasing goods and services. The demand for cryptocurrencies comes from the desire to hide money and carry out confidential transactions with money. This is why people involved in criminal activities, including money laundering and tax evasion, use them: as a result, the transactions carried out are no longer easily traceable.

3.

The rest of the world cannot stand by and watch. We have seen that global cooperation can work, as shown by the 15% global minimum tax on multinational profits that more than 50 countries are now introducing. Within the G20, the consensus forged last year under Brazil’s leadership requires that the very rich pay their fair share.

The US has distanced itself from international agreements, but paradoxically, its lack of diplomacy can help strengthen multilateral negotiations to achieve a more ambitious outcome. In the past, the US has first demanded that an agreement be weakened (usually to benefit a special interest), but has ultimately refused to sign it anyway. This was the case during the OECD negotiations on the taxation of multinational corporations. Now, the rest of the world can get on with the task of designing a fair and efficient global tax architecture.

Addressing extreme inequality through international cooperation and inclusive institutions is the real alternative to rising authoritarianism. America’s self-isolation creates an opportunity to rebuild globalization on a truly multilateral basis—creating a G-minus-one for the 21st century.

* Joseph E. Stiglitz is a Nobel Prize winner in economics and a professor at Columbia University (New York). Author of, among other books, The Great Gap Unequal Societies and What We Can Do About It (Alta Books). [https://amzn.to/4jzT7lt]

Translation: Eleutério FS Prado.

Originally published on the portals SocialEurope e Project syndicate.

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