(Bloomberg) -- Former Treasury Secretary Lawrence Summers decried the stripping of a global corporate minimum tax from the Democrats’ recent tax-and-climate change bill, a move that he said threatens a historic international agreement.
“It’s very sad how much special-interest lobbyists were able to stop things that are clearly in the public interest,” Summers said Wednesday on Bloomberg Television’s “Wall Street Week” with David Westin. “I am pretty offended by what’s happened here” with regard to businesses fighting against tax provisions in the legislation, he said.
Summers also blasted the removal of a proposal to scale back the so-called carried-interest tax break, which lets investment managers use a lower rate than for regular income, an advantage Summers called “outrageous.”
“Even more unfortunate,” Summers said, is that Inflation Reduction Act, cleared by the Senate over the weekend, lacked any steps to put the US in compliance with last year’s international agreement on a 15% minimum corporate tax, negotiated by Treasury Secretary Janet Yellen.
“That’s probably going to collapse now, or may well collapse, because Congress wouldn’t pass the enabling legislation by going after tax havens,” Summers said of the deal that involved nearly 140 nations.
At the same time, Summers, a Harvard University professor and paid contributor to Bloomberg Television, praised the overall tax-and-spending bill, which marks “the first major legislation taking on climate change as an economic strategic priority.” The House is expected on Friday to pass the plan, which includes about $437 billion in new spending.
The impact of the bill may end up growing over time, becoming a game-changer in the way that the introduction of Social Security, Medicaid and Medicare were in the 20th century, Summers said.
Separately, the former Treasury chief reiterated his view that the Federal Reserve should stick with its monetary tightening in order to stabilize consumer prices, with the latest monthly report failing to justify any “pivot” at this point.
Smaller gains in the CPI headline and core measures were “encouraging,” Summers said after the July figures came in less than forecast on Wednesday. “If the Fed regards this as a major game-changer, they will be making another major mistake.”
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