Tuesday night, the president said that he would "finally" get rid of "tax breaks for corporations that ship our jobs overseas." Dan Griswold recently wrote about this topic.
Politicians are not usually specific about exactly what "tax breaks" they want to repeal. The biggest tax exemption for U.S. companies that invest abroad is the deferral of tax payments for "active" income. U.S. corporations are generally liable for tax on their worldwide income, whether it is earned in the United States or abroad. But the relatively high U.S. corporate tax rate is not applied to income earned abroad that is reinvested abroad in productive operations. U.S. multinationals are taxed on foreign income only when they repatriate the earnings to the United States. Not surprisingly, the deferral of active income gives U.S. companies a powerful incentive to reinvest abroad what they earn abroad, but this is hardly an incentive to "ship jobs overseas."
Such deferral may sound like an unjustified tax break to some, but every major industrial country offers at least as favorable treatment of foreign income to their multinational corporations. Indeed, numerous major countries exempt their companies from paying any tax on their foreign business operations. Foreign governments seem to more readily grasp the fact that when corporations have healthy and expanding foreign operations it is good for the parent company and its workers back home.
If President Obama and other leaders in Washington want to encourage more investment in the United States, they should lower the U.S. corporate tax rate, not seek to extend the high U.S. rate to the overseas activities of U.S. companies. Extending high U.S. tax rates to U.S.-owned affiliates abroad would put U.S. companies at a competitive disadvantage as they try to compete to sell their goods and services abroad. Their French and German competitors in third-country markets would continue to pay the lower corporate tax rates applied by the host country, while U.S. companies would be burdened with paying the higher U.S. rate. The result of repealing tax breaks on foreign earnings would be less investment in foreign markets, lost sales, lower profits, and fewer employment and export opportunities for parent companies back on American soil.
Not only is Barack the Obamessiah targeting American businesses here at home via the tax increases on millions of small businesses making more than $250,000, but he could very well be targeting American businesses overseas, too.
We'll have to wait and see what he does on this, but if this "tax break" gets revoked, it can't get much more clear that Obama is deliberately trying to ruin American businesses. If it suddenly becomes more expensive to operate both here and abroad, we won't just see outsourcing of workers, we'll see outsourcing of entire companies and industries!
How many more dots do we need to connect before the case that Obama is trying to kill the American economy becomes ironclad, even for Kool-Aid drinkers?
There's my two cents.
No comments:
Post a Comment