After the hearing the other day in which a Senate committee castigated Apple for not paying American income taxes on tens of billions of dollars earned in other countries, the progressive financial media has been busy proposing all sorts of "fixes" for this "problem". It seems that their goal is to make the tax code even more complex and anti-growth than it already is.
Let's start with the obvious. Apple and the other American corporations that do business abroad have no obligation to pay taxes on income earned overseas unless and until they bring that money back to the USA. All of the brouhaha among the senators was nothing more than an indication that these people don't really understand the tax code that they wrote. Congress could certainly change the law so that all American companies had to pay tax on all of their profits, no matter where they were earned, but that is not the law. Indeed, the reason why Congress did not tax profits earned outside the country was to allow American companies to compete on an equal footing with foreign companies. Think about it, if a British company has to pay UK taxes when it does business in London but the American company has to pay both UK and American taxes when it does the same thing, the British company has a major advantage. In other words, it would be a major blow to American corporations were Congress to change the law to tax foreign sourced income.
A second obvious point: the goals of any change in the tax code on this point have to include something more than just grabbing more tax revenue. There has to be a major effort to use the change to promote economic growth, something that the progressives ignore. Remember, there is just about two trillion dollars held off shore in accounts of American corporations. If even half that amount could be brought back to the USA, the boost to the economy would be huge.
It never fails to amaze me that some in the financial media (like Bloomberg) advocate for the wisdom of subjecting all profits of American corporations to taxation, no matter where they were earned. They analyze this move as one which will raise revenue. It is a triumph of ignorance over reality. Imagine what you would do if you were an American company that had 70% of its business overseas. The answer is simple: you would move the company somewhere else. This is not a new strategy. Remember Tyco? They reincorporated in Bermuda for tax purposes. Other large companies could easily do the same. Is that corporate exodus really the outcome that these folks want? Do we want to lose even more jobs than we already have?
I realize the the progressive ideology thinks of large corporations as evil and rich entities that must be controlled and heavily taxed. Ideology, however, will not help folks who are unemployed or those who will become unemployed if this ideology triumphs. We need to have leaders who understand how the economy actually works.
Let's start with the obvious. Apple and the other American corporations that do business abroad have no obligation to pay taxes on income earned overseas unless and until they bring that money back to the USA. All of the brouhaha among the senators was nothing more than an indication that these people don't really understand the tax code that they wrote. Congress could certainly change the law so that all American companies had to pay tax on all of their profits, no matter where they were earned, but that is not the law. Indeed, the reason why Congress did not tax profits earned outside the country was to allow American companies to compete on an equal footing with foreign companies. Think about it, if a British company has to pay UK taxes when it does business in London but the American company has to pay both UK and American taxes when it does the same thing, the British company has a major advantage. In other words, it would be a major blow to American corporations were Congress to change the law to tax foreign sourced income.
A second obvious point: the goals of any change in the tax code on this point have to include something more than just grabbing more tax revenue. There has to be a major effort to use the change to promote economic growth, something that the progressives ignore. Remember, there is just about two trillion dollars held off shore in accounts of American corporations. If even half that amount could be brought back to the USA, the boost to the economy would be huge.
It never fails to amaze me that some in the financial media (like Bloomberg) advocate for the wisdom of subjecting all profits of American corporations to taxation, no matter where they were earned. They analyze this move as one which will raise revenue. It is a triumph of ignorance over reality. Imagine what you would do if you were an American company that had 70% of its business overseas. The answer is simple: you would move the company somewhere else. This is not a new strategy. Remember Tyco? They reincorporated in Bermuda for tax purposes. Other large companies could easily do the same. Is that corporate exodus really the outcome that these folks want? Do we want to lose even more jobs than we already have?
I realize the the progressive ideology thinks of large corporations as evil and rich entities that must be controlled and heavily taxed. Ideology, however, will not help folks who are unemployed or those who will become unemployed if this ideology triumphs. We need to have leaders who understand how the economy actually works.
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