With the protests against corporate greed spreading not just nationally but internationally, the Republicans in Congress have decided now is the perfect time to revamp our corporate taxes and move toward a territorial system:
The idea behind the system is to encourage multinational companies to bring back their money to the U.S., where supporters of the change say the money could be invested. Proponents also argue the move would make U.S. companies more globally competitive, particularly since most industrialized countries have tax systems in which companies are only taxed in the country where it is earned.
The Ways and Means proposal would not be a fully drafted bill, but instead a proposal that would allow business groups and other stakeholders to offer suggestions. As of now, it’s unclear when the panel might release the proposal.
Well, that’s nice of them to let the corporations write their own laws. Why even bother with an expensive, unwieldy institution like Congress? Just let the corporations do what they want, right? Dispense with the middle men/women!
Now, would someone please explain to me how taxing American corporations only on profits made within U.S. borders encourages them to bring their money back to the U.S.? Near as I can tell, the territorial idea simply encourages multinationals to move more of their operations offshore (and Citizens For Tax Justice seems to agree with me). It’s basically the same as our present “deferral” system. In theory, under “deferral” corporate profits generated overseas are not taxed but “deferred” until they’re brought back to the U.S., but in practice that never happens because multinational corporations have all sorts of overseas subsidiaries and tax havens where they park these funds. That’s the whole point of “repatriation” — letting corporations bring that money home at temporarily reduced tax rates.
Shouldn’t we do away with the “deferral” loophole, not cement it in place? I guess Republicans are trying to pretend that overseas profits will flood back to the U.S. like a mighty river of tax-free revenue — kind of like the “repatriation” scheme, but set in stone in the corporate tax code. It’s that same Republican fairy tale: lower taxes create jobs! That’s what they keep telling us, isn’t it?
Well let’s see how that worked last time we offered multinationals a chance to repatriate their offshore funds at low, low tax rates. We did that under Bush The Lesser in 2004. So, guess what the participating companies did with their tax savings?
…in fact, the corporations who took most advantage of the holiday enacted in 2004 shed jobs in the ensuing years and did not increase their rate of spending on research and development.
On the flip side, the study found those corporations also appear to have used the holiday for stock buybacks and to boost executive pay, which was not allowed under the legislation authorizing the holiday.
Oh noes! And Republicans want to make this permanent? Egads.
But Republicans are still drinking the “lower taxes creates jobs” Kool-Aid, despite the continued failure of these ideas. We’ve been cutting taxes on wealthy “job creators” for years, and we still aren’t seeing the magic. And now they want to permanently cut corporate taxes with this “territorial” scheme because hey, if they’re doing it in the UK and Japan, then we have to, right? To be “competitive”?
You know what they have in the UK and Japan that makes them competitive? A functioning healthcare distribution system that doesn’t place the burden of our overpriced, for-profit healthcare system on the backs of employers. But I digress.
Citizens For Tax Justice thinks we need to go in the complete opposite direction, which means keep our worldwide tax system but remove the “deferral” loophole. That removes the incentive corporations have to offshore their operations and move jobs away from the U.S. That makes absolute perfect sense to me, but our debate is so muddied with the fairy tales, I’m sure we’ll keep hearing about how lower taxes creates jobs over and over again. Yet no one can ever point to a time when that was true.
Anyway, this idea was first floated back in the spring but now the GOP is supposedly moving forward with it. I’m just trying to imagine how a corporate tax idea that permanently encourages outsourcing jobs while offering corporations lower tax rates will go over with the masses protesting corporate greed. I’m thinking not too well.