US’ Global Minimum Tax Carveout Is an Illusion of Sovereignty

Adam N. Michel Supporters of the OECD’s new Pillar Two “side-by-side” agreement —which carves the US out of the global minimum tax—claim the deal protects US tax sovereignty and preserves Congress’ authority over domestic tax law. , Treasury Secretary Scott Bessent called the agreement a victory for US sovereignty, saying it will shield domestic companies from extraterritorial taxation.

That claim deserves closer scrutiny. If the agreement works as intended, it doesn’t preserve congressional sovereignty over domestic tax laws; it constrains it. The agreement’s statutory and effective tax rate safe harbors lock in current tax rules, binding future Congresses to a narrow range of acceptable tax policies—unless they’re willing to expose US firms to the Organization for Economic Cooperation an