Last night, President Obama threw in his usual rhetoric about ”ending tax breaks for corporations that ship our jobs overseas.”
I suspect that the president has no idea what he is talking about. The United States already has probably the most burdensome tax rules on multinational corporations of any major country.
Peter Merrill, one of the nation’s top tax economists explained in Tax Notes on Monday:
The United States taxes corporate income on a worldwide basis, including dividends repatriated by foreign subsidiaries, and allows a limited credit for foreign taxes paid regarding those dividends. By contrast, most OECD countries (21 out of 30) have dividend exemption systems under which dividends from foreign subsidiaries are exempt.
In other words, only nine of 30 major industrial countries tax the foreign business profits of their corporations, and the United States does so probably the most aggressively of any.
U.S. corporations are moving investment and profits abroad, but it is because we have the world’s second highest corporate tax rate, not because of special loopholes as the president keeps implying.
It is pathetic that American policymakers sit on their hands avoiding the global tax revolution, while constantly taking cheap shots at corporations, especially when other countries are moving ahead with business tax reforms.
For example, today’s International Tax Review describes possible corporate tax cuts by the left-of-center Australian government:
Australia may have to cut its corporate tax rate in an effort to increase economic growth and attract greater foreign investment, said Ken Henry, secretary to the Treasury.
Henry also noted that a corporate tax cut would increase real wages. What is it about these benefits of corporate tax cuts that American policymakers don’t understand?