/PRNewswire / -- A repeal of the rules governing the way the United States taxes the foreign earnings of U.S. companies could have dramatically adverse effects on U.S. jobs and investment and leave U.S. companies less competitive in global markets, according to a new economic report released today.
The report, authored by Robert J. Shapiro, a former Clinton Administration economic official, and Aparna Mathur, a Research Fellow at the American Enterprise Institute, found that as many as 2.2 million American jobs could be affected by a repeal, or effective repeal, of "tax deferral."
The report, commissioned by the Technology CEO Council, also found that:
-- Besides affecting jobs, investments in the United States in plant,
equipment and property could fall by as much as $84.2 billion.
-- Repealing or sharply limiting deferral would not generate large tax
revenues, since substantial job losses, wage cuts and lower
investments would reduce tax revenues.
Congress is now considering legislation that would sharply limit the "deferral" rules that protect U.S. businesses from bearing much higher tax burdens on their earnings abroad than their foreign competitors in the same markets.
The key to these results is evidence showing that in modern global companies, new investment and job creation in foreign subsidiaries are closely linked to new investment and job creation by the parent companies in the United States. These close linkages mean that while reducing or repealing deferral may be tempting politically, it would produce significant, negative economic consequences. The policy goal of changing deferral is ostensibly to make the United States a more desirable place for investment and job creation, but these changes would have the opposite effect of reducing domestic investment and jobs.
"The current proposal to substantially restrict 'deferral' would end up reducing American jobs and investment and could impair our economic recovery," said Dr. Shapiro, who has advised U.S. President Bill Clinton and British Prime Ministers Tony Blair and Gordon Brown as well as other leaders and private companies.
"The Obama Administration deserves credit for many initiatives to promote investment and innovation," said Bruce Mehlman, Executive Director of the TCC, a group made up of high-tech CEOs focused on policies that strengthen American competitiveness. "But we cannot expect to lead the world in high tech by marrying the world's best innovation infrastructure with the world's most confiscatory corporate tax structure."
The report concludes that the Administration and the Congress should conduct a serious review of the tax code and identify broad reforms that take account of the actual dynamics of the global economy and the need to support the integrated operations and international competitiveness of American companies.
-----
www.politicalpotluck.com
Political News You Can Use
Showing posts with label united states. Show all posts
Showing posts with label united states. Show all posts
Monday, June 8, 2009
Monday, May 4, 2009
Obama's Proposal to Double-Tax Profits Will Kill U.S. Jobs
/PRNewswire / -- With President Barack Obama and Treasury Secretary Tim Geithner today announcing a job-killing tax increase of over $200 billion over the next ten years, Americans for Tax Reform issued the following fact sheet on the state of international and corporate taxation:
America has the highest corporate income tax rate in the developed world. The United States is tied with Japan for one very dubious honor -- having the highest corporate income tax rate in the developed world. According to the OECD, the United States has a combined marginal corporate rate of nearly 40 percent. This compares very negatively to our European competitors' average rate of 25 percent. The Republic of Ireland stands in the starkest contrast, with a corporate income tax rate of 12.5 percent. In the developing world, rates of 10 or 15 percent are commonplace.
America is one of the only developed countries that double-taxes the international profits of our own companies. If a Polish company earns a profit in France, it pays the French corporate income tax, and nothing else. But if a U.S. company earns that same profit in France, it must pay the French corporate tax and the U.S. corporate tax (minus whatever was paid to France). So not only does the U.S. impose the highest corporate rate in the world, it makes sure that this rate is applied to both domestic and international profits. This is called a "worldwide taxation system" and the U.S. is one of a tiny handful of countries that still practices it.
Recognizing the problem this creates, Congress has crafted a confusing set of exclusions, deferrals, deductions, and credits on international profits. In general, U.S. companies can avoid paying this double-tax until they repatriate the profits back to the U.S.
By seeking to take away these double-tax band-aids without lowering the corporate rate substantially or fixing the global taxation scheme, Obama's proposal will shove jobs and capital out of America and into foreign countries. Obama's budget and Congressional tax-writers have been clear -- they want companies to pay the full corporate rate as soon as the international profit is earned. In a global economy, companies don't have to take this lying down. It's a relatively simple matter for a U.S. company with an Irish subsidiary to become an Irish company with a U.S. subsidiary. The Obama plan will force thousands of companies to make this job-killing decision. Companies that export goods will soon start exporting jobs.
The U.S. should tax our companies the way the rest of the world taxes theirs -- territoriality. The rest of the developed world has figured this out: if they want to retain jobs and capital in their countries, they have to adopt territoriality. This means that companies only pay corporate income tax in the country where the profit is earned. The U.S. partially tried this in 2005, when companies were allowed to repatriate deferred foreign earnings at a 5.25% rate -- far lower than what they would have to pay otherwise. The result was a one-year infusion of $318 billion in capital to the United States, resulting in $17 billion in additional corporate income tax payments, and the creation of thousands of new jobs.
The U.S. needs to lower our corporate income tax rate to become more competitive. American employers are competing globally with Irish, British, German, etc. companies. It makes no sense to saddle our employers with the highest corporate rate in the world. At the very least, we need to lower our corporate tax rate to 25 percent or less. This simply begins to make our tax treatment of large employers somewhat comparable to our European competitors. When combined with territoriality, this move would begin to change the corporate tax culture in the U.S. from a jobs killer to a jobs magnet.
America has the highest corporate income tax rate in the developed world. The United States is tied with Japan for one very dubious honor -- having the highest corporate income tax rate in the developed world. According to the OECD, the United States has a combined marginal corporate rate of nearly 40 percent. This compares very negatively to our European competitors' average rate of 25 percent. The Republic of Ireland stands in the starkest contrast, with a corporate income tax rate of 12.5 percent. In the developing world, rates of 10 or 15 percent are commonplace.
America is one of the only developed countries that double-taxes the international profits of our own companies. If a Polish company earns a profit in France, it pays the French corporate income tax, and nothing else. But if a U.S. company earns that same profit in France, it must pay the French corporate tax and the U.S. corporate tax (minus whatever was paid to France). So not only does the U.S. impose the highest corporate rate in the world, it makes sure that this rate is applied to both domestic and international profits. This is called a "worldwide taxation system" and the U.S. is one of a tiny handful of countries that still practices it.
Recognizing the problem this creates, Congress has crafted a confusing set of exclusions, deferrals, deductions, and credits on international profits. In general, U.S. companies can avoid paying this double-tax until they repatriate the profits back to the U.S.
By seeking to take away these double-tax band-aids without lowering the corporate rate substantially or fixing the global taxation scheme, Obama's proposal will shove jobs and capital out of America and into foreign countries. Obama's budget and Congressional tax-writers have been clear -- they want companies to pay the full corporate rate as soon as the international profit is earned. In a global economy, companies don't have to take this lying down. It's a relatively simple matter for a U.S. company with an Irish subsidiary to become an Irish company with a U.S. subsidiary. The Obama plan will force thousands of companies to make this job-killing decision. Companies that export goods will soon start exporting jobs.
The U.S. should tax our companies the way the rest of the world taxes theirs -- territoriality. The rest of the developed world has figured this out: if they want to retain jobs and capital in their countries, they have to adopt territoriality. This means that companies only pay corporate income tax in the country where the profit is earned. The U.S. partially tried this in 2005, when companies were allowed to repatriate deferred foreign earnings at a 5.25% rate -- far lower than what they would have to pay otherwise. The result was a one-year infusion of $318 billion in capital to the United States, resulting in $17 billion in additional corporate income tax payments, and the creation of thousands of new jobs.
The U.S. needs to lower our corporate income tax rate to become more competitive. American employers are competing globally with Irish, British, German, etc. companies. It makes no sense to saddle our employers with the highest corporate rate in the world. At the very least, we need to lower our corporate tax rate to 25 percent or less. This simply begins to make our tax treatment of large employers somewhat comparable to our European competitors. When combined with territoriality, this move would begin to change the corporate tax culture in the U.S. from a jobs killer to a jobs magnet.
Subscribe to:
Posts (Atom)