Right now, companies get tax breaks for moving jobs and profits overseas.
If you're a business that wants to outsource jobs, you shouldn't get a tax deduction for doing it.
He is implying that the IRS code has tax breaks specifically for outsourcing, no?
One of the more breaks was the notorious Hummer tax credit. At the last opportunity the gross weight of business vehicles qualifying for business tax credits was raised to cover the Hummer. Therefore a businessman who owed $100,000 in taxes could instead just buy a Hummer and drive his tax payment around. Cool, hunh? My accountant explained that one to me. If the purchase price is en lieu of paying the money to the hated government who cares what the price or gas mileage is? As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
The problem with the "Times" proposed solution is that it provides a fair amount of tax relief for US corporations that move jobs and production off-shore, but does less to encourage them to return jobs and production to the US. As I understand it, they could still manufacture goods in a country with ridiculously low labor costs, sell them to US consumers and pay a rather low tax rate (no more than 20%) on any profits. I can swear there ain't no heaven but I pray there ain't no hell. _ Blood Sweat & Tears
Only problem is that the effective US corporate tax rate is around 2.3%, so for most big corporations, a tax owed of the difference between foreign tax paid on the income and US tax paid would leave no US tax due.
Meanwhile, while repeatedly proposing this policy (from his primary campaign on), but somehow never getting it passed into law (which would spoil the shell game, since it could not then be used on the campaign trail), Obama has supported corporate wealth agreements with South Korea, Columbia and Panama, entrenching the corporate freedom to move wealth across national borders unfettered by any constraint in the interests of economic stability or in defense of individual liberty from corporate power. I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
Under the US system of government, laws must be passed by the legislature.
At an effective corporate income tax rate below 3% on average, foreign earned income exclusions can only be a significant factor in the limited number of cases where the US corporation would find itself actually having to pay something like the headline US corporate income tax rate. I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
The tax haven part of the tax dodge has nothing to do with "outsourcing US jobs overseas". Its simply a financial manipulation where the US company establishes a subsidiary in a tax haven. The tax haven subsidiary raises money. The US corporation borrows that money from its own subsidiary. It then pays interest to the tax haven subsidiary on the loan, which is a pre-tax expense, and the income received by the tax haven subsidiary at or close to tax free.
Sure its a tax dodge, but it is the same tax dodge whether the project that is financed is located in the US or overseas. Indeed, if you closed the financial manipulation tax haven loophole, but left the credit in place for a place where the company engage in substantial value added, that's when the tax credit on the activity taking place overseas would begin to have a substantial differential impact.
And the fiscal impact of the changes proposed again this year is supposed to be $190b over ten years.
US corporate tax receipts have dropped from 4% of GDP in the 60's to under 2.5% of GDP in this last decade. $19b/year is only around 0.1% to 0.2% of a $14T~$19T economy.
Meanwhile, while the policy of "cutting tax credits for US companies that ship American jobs overseas" is in the stump speech, with zero chance of being supported by the 60 Senator supermajority required under the present gross abuse of the filibuster, three more aggressively neoliberal "free trade" agreements for unfettered corporate wealth transfers across national borders have been passed into law with the President actively lobbying for them. I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
http://www.usatoday.com/money/perfi/taxes/2008-03-20-corporate-tax-offshoring_N.htm
Sell IP to Holland co. Locate world operations in Irish Co. Bermuda co owns Holland co and provides "management" to Irish co.
Money comes into Irish co. Some goes to bermuda tax free. Royalty payments go to Netherlands which exempts royalty income from taxation. Then money goes to holding co. in Bermuda.
3% tax rate!
