In an address, President Obama declared war against tax havens and tax evaders – a thing that deeply troubles multinational companies. The statement, was, however, not without backlash as businessmen and politicians alike, raised their disagreement. Experts consider drastic changes to corporate tax laws as a losing battle, citing previous moves to extract more tax from multinational companies that only proved to be ineffective.
The economy is in really bad shape that it seems that drastic measures really need to be taken. The intentions are good, noble, in fact, but experts think that a tax system overhaul will only trigger an open season for loopholes to be exploited by enterprising lawyers and accountants.
A Business Week article presents a counter-proposal to Obama’s plans:
Here’s a radical idea: Obama should go the other direction, striking a blow for simplicity and jobs by reducing the corporate income tax rate from its current 35% to 25%.
This, according to writer Michael Mandel, will give US-based multinationals more leverage against foreign-based multinationals giving them more incentive to base operations in the country. In addition, it allows the US to keep cash flow within its borders.
In order to curb our ballooning budget deficit we have now turned to taxing our own multinationals. These U.S. firms will have a difficult time staying globally competitive if forced to pay taxes on foreign profits and this is primarily due to our monetary system being used as a printing press. The new tax plan may cause companies to move their business out of the U.S and deter new businesses from domiciling here. This plan will eliminate American jobs not create them. The current rules put our companies on equal tax footing with those overseas, since foreign governments do not tax as high as we do. Their overseas operations support jobs in the U.S. Obama believes the new plan will stem the ouflow of jobs from the US but the jobs arent moving overseas because of taxes but due to the low cost of skilled labor that exists overseas. Foreign governments may also offer subsidies to any U.S multinationals to continue to outsource their jobs, this mitigates the tax impact to the mutlinational.
As long as we keep printing money to bail out failing industries the value of our dollar and our purchasing power will continue to decrease while inflation ticks higher.