Many of our corporations have moved overseas to escape the increasing tax burden America imposes. Some companies simply cannot compete globally within the U.S. corporate tax rate. In the last two decades we have seen countries lowering their corporate tax to entice companies to locate with them. For a time it was almost like a bidding war with most countries now imposing around 15-20%. The United States corporate tax is 35%, the second highest corporate tax rate in the world. Closer to 40% when combined with state taxes.
Obama has just proposed eliminating tax loopholes. Ironically he made this announcement with Timothy Geithner standing by his side.
A major change would be to the “deferral” rule that U.S. multinational companies use when registered overseas, which lets U.S. based multinationals deduct expenses for overseas operations, but defer paying income tax on the profits from those operations. That gets paid only if and when companies bring that money back to the United States.
The administration proposed further that the companies must also defer taking their deductions until their overseas profits are brought back to the country.
Keep in mind these companies pay a corparate tax to the country where they operate. Obama’s proposal would also eliminate any credit they may receive against their U.S. tax.
Now they will be taxed twice.
This will be an extreme blow to U.S. based multinational companies.
What do you think this will do for consumer spending as prices increase or the job market as companies down-size.
Or do you not want our corporations to compete globally. Many will just go away… bye.
“These aren’t loopholes. These were put into the code with full knowledge and full discussion,” said U.S. Chamber of Commerce chief economist Martin Regalia. “This is only about raising more money — it’s not about making the tax code simpler or more efficient or easier or anything else.”
It would take a lot more than this to simplify our tax code. Over 60,000 pages and counting, it’s a joke. It’s legalise run amouk.
Want the economy to grow? Here’s a good start:
- Lower Corporate Taxes – Make it attractive and profible for companies to opperate.
- Lower Capitol Gains Taxes – Make it attractive for people to invest in U.S. companies
Here’s something you probably didn’t know: Ireland today is the richest country in the European Union after Luxembourg. In the mid 1980’s they were going broke.
“We went on a borrowing, spending and taxing spree, and that nearly drove us under,” said Deputy Prime Minister Mary Harney. “It was because we nearly went under that we got the courage to change.”
They slashed their corporate rates to 12.5%
The results have been phenomenal. Today, 9 out of 10 of the world’s top pharmaceutical companies have operations here, as do 16 of the top 20 medical device companies and 7 out of the top 10 software designers. Last year, Ireland got more foreign direct investment from America than from China. And overall government tax receipts are way up. (from The End of The Rainbow by Thomas Friedman N.Y.Times 2005)