One bad tax idea

Obama is again touting his version of tax reform, which eliminates major tax exemptions for U.S. firms having operations overseas. (Obama calls this "shipping jobs overseas.") Currently, the United States is the only developed country to tax the foreign-earned profits of locally-based companies [1]. Unconcerned about such things, he argues that his reform would improve fairness and encourage firms to keep jobs in the United States, being "a down payment on the larger tax reform we need to make our tax system simpler and fairer."

 

Fair? He still doesn't get it. "Fair" would mean dropping the excessively boring appeal to injustice. If anything, since the U.S. has the second highest corporate tax rate among developed countries, "fair" would mean lowering tax rates for firms earning profits in the United States, not raising them on firms earning profits abroad (the third highest corporate tax rate is a full 5% lower than the U.S. tax rate). "Fair" would mean rewarding firms for innovation and efficiency, not spanking them for sensibly managing tax exposure. (So it's okay for a firm to maximize gross profits, but not net profits? Go figure.)

 

Whatever his logic, it is clear that his version of fairness is inconsistent with anything that constitutes reasonable economic sense.

  

[1] "Obama Targets Overseas Tax Dodge," Washington Post, 5/5/09, accessed 1/29/10.