Putting American Jobs, Competitiveness, and Economic Health First

As America continues on the path to a full and robust economic recovery, business leaders are working alongside President Obama and Congress to forge a path forward, create new jobs, and usher in a new era of economic health.

Public policy can serve as an important catalyst for recovery or severely damage the momentum the economy seems to be gaining. It is important that we build on this momentum and establish a foundation for long-term, sustainable growth that will benefit American workers. During these fragile economic times, we need policies that foster growth; however, the current proposal to raise taxes on American companies that do business overseas by an estimated $200 billion over 10 years will do just the opposite.

Companies from almost all other industrialized nations are not required to pay taxes on international revenues to their home nations. Instead, they operate under territorial tax systems in which they pay corporate income taxes only in the country where revenues are earned.

In stark contrast, the U.S. employs a worldwide tax system -- earnings are taxed where revenues are earned, and then taxed again in the U.S. To compensate for this double taxation, which places American companies at a disadvantage with foreign rivals, the U.S. has created a system of accounting rules and deferrals meant to help maintain a level playing field. It is this system that is under attack. The current proposed changes to the tax code for American global companies would risk much of our economic recovery to date, putting in jeopardy our jobs, the ability of American businesses to compete, and the health of our economy -- something that benefits all of us.

Without deferrals -- the mechanism that balances U.S. corporate taxes against foreign tax systems -- American companies would have fewer dollars to reinvest back home. The new rules would also limit the flexibility of U.S. businesses to redeploy capital to geographic areas that show the most promise for growth (through the so-called "check-the-box" tax option) and eliminate vital foreign tax credits.

Why does this matter? Because overseas expansion supports thousands of companies and millions of jobs here at home. Administrative, financial, marketing, and even manufacturing jobs in the U.S. support -- and benefit from -- operations in other countries; in fact, research indicates that overseas expansion tends to correspond to domestic job creation.

On the flip side, restricting deferral, or the availability of foreign tax credits for that matter, would put real pressure on many businesses to not just trim expenses, including those associated with employing workers in well-paying jobs in the U.S., but also to compensate for lost revenues by increasing the prices of the goods and services they produce. In other words, the real cost of this proposed tax change would be an increase in wholesale and consumer prices -- something that would impact virtually every American. That is not something that the business community wants; we do not believe it is something that Americans in general or our elected representatives in our nation's capital want, either.

The business community understands that the federal government must attend to its balance sheet. But we also know that with some of the country's best minds engaged in determining how best to do that, it is a goal that can be accomplished without putting at risk the real economic gains that we, working with President Obama and Congress, have achieved in recent weeks and months.

Congress should reject these proposed tax changes -- an effective tax increase--in favor of sensible reforms as part of broader federal tax reform effort. Together, we can promote job growth here in the U.S., the competitiveness of American businesses, and the long-term health of our economy.

 

 

Comments

[therealredstateblues]

what the author is talking about is the tax structure that encourages expatriatation of investment and jobs

the very tax structure that encoruages outsorucing

we should be taxing profits and goods made abroad, and rebating this to exports and domestic production

this author is using the same old global1st nonsense - that we know sin't working for US middle class and working people

enough already

lets really put american industry and jobs first by doing away with the tax incentives to offshore

[DuganS1]

Taxing goods made abroad just increases prices for consumers and reduces profits for domestic retailers, which in turn hurts investment and reduces employment. US multi-nationals already pay tax to the country their facilities are based in. Then they pay tax to the US on top of that, particularly if they repatriate the money. If you tax US multi-nationals operations abroad at the same rate as multi-nationals operations in the US, such a large portion of the profits would go toward taxes making these operations uncompetitive vs foreign multi-nationals and foreign domestic companies. It's counter-productive. If you force multi-nationals to pay taxes on their un-patriated profits, you would simply reduce the total amount of money available for investment, which reduces the long term growth (or even viability) of that company. FDR found this out when he passed the undistributed profits tax in 1936. Companies simply cut back on investment and the economy deteriorated.

IMO, the US govt should eliminate the payroll tax for individual and corporations. It hurts low income workers, small businesses, and makes the hiring of US workers less attractive than foreign workers for multi-nationals. The US govt can make up for lost income by increasing taxes on rich. The US govt could also stimulate investment in the US by reducing the corporate tax on domestic operations from 35% to 15%, which would increase investment and thus jobs.

[therealredstateblues]

not buying it for a minute

[therealredstateblues]

and here's why

in FDR's day we had trade surplus and plenty of comapnies willing to invest in the US,

there wasn't a HUGE problem of expatriating capital and jobs and an unsustainable trade deficit

a very tenuous case may have been made then, but can not be made today - because the times and situation were completely different

[therealredstateblues]

while I agree on the regresivity of the payrol tax

the US already has some of the lowest effective corporate taxation in the industrial world, and most major corporations pay no taxes at all

how much lower do taxes need to be borde these businesses put their money where their mouths are and create and invest?

[vlm1948]

Why does this matter? Because overseas expansion supports thousands of companies and millions of jobs here at home. Administrative, financial, marketing, and even manufacturing jobs in the U.S. support -- and benefit from -- operations in other countries; in fact, research indicates that overseas expansion tends to correspond to domestic job creation

Could you please give some examples of how this works? It doesn't seem to be that way at all to me.

[Sinick]

Let me see if I can wrap my brain around this. The way it stands now, corporate tax advisors ensure that US corporations pay virtually no domestic taxes. They also re-locate their operations and shift revenues offshore in order to pay the lowest international tax rate. Seems to me that this is a far cry from being "double taxed."

If this is indeed the case, why wouldn't Corporations want to maintain the status quo, just like they do with any other issue related to their profitability? Methinks that you are pulling our legs.

[therealredstateblues]

Shocked, shocked that the president of the Business Rountable would be in favor of a tax structure that ecnourages profits from the offshoring of jobs and and capital to labor exploiting and regulation avoiding countries