Brian Deese, head of the White House’s National Economic Council, explains the administration’s opposition to Russia’s invasion of Ukraine by saying: “This is about the future of the Liberal World Order, and we have to stand firm.”
But not so firm as to terminate America’s 30-year-old tax treaty with Russia, which ensures proper tax treatment of citizens of both countries.
Without the treaty, Russian investors with U.S.-sourced dividends would face a 30 percent withholding tax rate and lose preferential treatment.
The U.S. is honoring the Russian treaty at the same time it is abrogating its 43-year-old tax treaty with Hungary, punishing that country for resisting a global minimum tax of 15 percent for multinational corporations that’s being pushed by the Biden administration. As a member of the European Union, Hungary must give its approval before the EU can impose the new minimum tax.
Hungary levies a corporate tax rate of just 9 percent and insists that its low rate has attracted jobs and capital that would be lost under a new minimum tax.
Hungarian prime minister Viktor Orbán’s populist government has been a thorn in Biden’s side for years. During the 2020 campaign, Biden singled out Orbán as a “thug.” But Orbán, unlike Vladimir Putin, is a freely elected leader, having just defeated a united opposition by 17 points in April.
Adrian Smith and Mike Kelly, two GOP House members on the Ways and Means Committee, say Biden’s move will only add to the U.S.’s reputation as an undependable ally. They also say that, while Biden can negotiate a global minimum tax, Congress will have to enact legislation for the U.S. to be involved.
Biden is on shaky legal ground in trying to force through an anti-growth tax cartel. He is also on shaky moral ground by letting Russia keep its tax treaty while shutting down one with Hungary, a formerly Communist nation whose opening up of its borders in May 1989 accelerated the end of the Cold War and the collapse of the Soviet Union.