End This Crazy Tax: It Will Boost the Economy

Cisco (NASDAQ: CSCO  ) reported record quarterly earnings last week, and the company now holds $46 billion in cash and short-term investments. That's great news for Cisco. But it's not great news for the U.S. economy. After earnings were released, CEO John Chambers told CNBC that until the U.S. tax code changes, Cisco is effectively done acquiring U.S. companies and expanding its domestic workforce.

The reason is that Cisco holds the majority of its cash overseas, and bringing it back to America would mean getting bulldozed by the U.S. tax code. "Wherever we acquire is where our head count growth is going to be," Chambers said. "If the majority of our money remains outside the U.S., and this depends on tax policies, that's where you'll see us acquire going forward."

Here's the skinny. If an American company earns profit in another country, it has to pay that country's income taxes. But if it then chooses to bring that cash back to America, it owes U.S. taxes, minus a credit for foreign taxes already paid. So imagine Cisco earns $1 billion profit in Switzerland. It will owe Switzerland's 8.5% corporate tax. But if Cisco then brings the remaining $915 million back to the U.S. to pay dividends or expand its workforce, it will owe another 26.5% to the IRS -- the difference between Switzerland's 8.5% tax rate and America's 35% rate. It's called the repatriation tax.

Cisco's other option is to keep the money in Switzerland (or whatever country it earns overseas profit in). Not surprisingly, that's what most global corporations choose to do. As of last March, U.S. companies held about $1.2 trillion in total cash. But almost 60% of that was sitting in foreign bank accounts, according to Moody's. Some companies hold the vast majority of their loot abroad. About 80% of Oracle's (NYSE: ORCL  ) cash is held overseas. Apple (NASDAQ: AAPL  ) holds close to 70% of its cash outside the U.S.

There are two crazy things about the repatriation tax. The first is that it doesn't raise much money for the U.S. Treasury. Using the most bearish assumptions, The Joint Tax Committee estimates that ending the repatriation tax altogether would raise deficits by about $8 billion per year -- a rounding error measured against $2.9 trillion in total revenue. A separate estimate from the Congressional Budget Office shows that ending repatriation taxes would actually raise federal tax revenue, since companies would likely bring more cash home to pay dividends, which are then taxed. Either way, repatriation taxes have a trivial impact on the federal budget.

Second, the repatriation tax is virtually unique to America. Of the G-7 group of nations, only America exercises a repatriation tax. Among the 34 OECD nations, 26 impose a "territorial" tax system, where profits are only taxed where they are earned, with no repatriation owed when earnings are brought back to a company's home country. Two of the last holdouts, Japan and the United Kingdom, switched to a territorial tax system in 2009. With the competition based in countries that use territorial tax systems, American companies are at a disadvantage. The easiest way for them to compete is to keep foreign profits in foreign bank accounts. The loser is the U.S. economy.

Congress allowed a repatriation holiday in 2004 as part of the American Jobs Creation Act. Corporations brought home more than $300 billion, according to the IRS. Yet with scant evidence that the holiday directly helped create jobs, lawmakers called the one-time deal a failure. Instead, every $1 of extra cash repatriated increased dividends and share buybacks by more than $0.90 -- a practice the law prohibited, but one that was nearly impossible to enforce since money is fungible. But so what? More than half of all U.S. households own equities. They benefit far more when corporate cash is used for dividends and share buybacks rather than hoarded in a bank account in Geneva.

The main argument against abandoning the repatriation tax is that it will entice corporations to ship business and jobs to countries that have lower tax rates. But they are already doing that. And it's a global economy -- the majority of S&P 500 earnings growth over the next five years will come from overseas, according to analyst Bob Doll. We can pretend it's otherwise, or move toward a more competitive tax code.

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  • Report this Comment On February 20, 2013, at 3:01 PM, EquityBull wrote:

    One reason it will never happen. Obama is never going to let it appear like he gave one company a break. Not during his term. 0% chance. The tax is stupid. If they suspended it the USA would garner major taxes via investment here, dividends, etc.

    Politicians just too stupid to understand any of this so we should accept that until we elect new officials this dumb tax will remain firmly in place and our economy will be sluggish.

    Obama instead will push to soak the wealthy as much as he can to pay for entitlements however if you took 100% of the income and entire estates of the top 1% you still would not dent the deficit or budget. This is just math. Politicians are in the game to keep their own jobs and to do that you tell people what they want to here today and disregard the consequences of tomorrow.

  • Report this Comment On February 20, 2013, at 3:08 PM, HiWho wrote:

    Bratts, corporations like Cisco, that is. He should tell that to the soldiers defending this country whose kids and family need jobs created in a free country. Let the CEOs follow their damn money over there. Just ask the McAfee guy how they treat rich bratts out there.

    Individuals are asked if they earned anything outside the US. It never asks how much you brough back.

    Goverment is a wimp too, they already know how much these companiues made, overseas, tax them even if they keep the money out there, and subtract that from R&D tax breaks. I mean it is a no brainer.

    Coprs get R&D tax break here, used that to develop products, as soon as it is ready fro production, they choose to produce elsewhere, Singapore especially. So what good was the R&D tax, if it creates jobs for other countries and they do not get taxed on it.

    I though R&D tax break, was an investment.

    In my small way, I will not buy a Cisco product.

  • Report this Comment On February 20, 2013, at 3:30 PM, slpmn wrote:

    The cash is "overseas" only because they shifted their profits to the lowest taxing foreign domains. It's accounting entries, nothing more. Let's not pretend they actually made money there, and now greenbacks are sitting in vaults in European capitals just waiting to be shipped back to the U.S. to create jobs.

    If they were honest and recognized their profits where they were actually earned, they would have paid US corporate income taxes on the bulk of it, and wouldn't have to worry about "repatriating" the funds. Any argument that the US corporate income tax rate is stifling job creation flies in the face of the data. US corporate after-tax profits are at record levels. If you cut taxes, they are not going to take the extra money and hire people. They are not going to raise the dividend. They are going to give their CEO a bonus for increasing EPS and the numbers in the cash account on the balance sheet will go up.

    Now, on the other hand, if they paid their taxes, that money could be used to help pay down the massive government debt incurred paying for, among other things, the infrastructure that supports a nation in which people can afford to buy toys like iPhones. I know, it would only amount to a few billion a year. But, a billion here, a billion there, and pretty soon, you're talking about real money.

  • Report this Comment On February 20, 2013, at 3:41 PM, AstroBoy2013 wrote:

    To HiWho

    If you are not buying Cisco products, why are you buying or using Apple, Intel and Microsoft products?

    All of them are having a lot of Cash outside of United States,

  • Report this Comment On February 20, 2013, at 3:45 PM, Ghote wrote:

    Imagine a corporation paying taxes to the country of its incorporation which protects it and allowed its incorporation in the first place. The last time corporations conned Congress into a tax amnesty, no jobs were created when the corporations brought back their sheltered monies. Corporations are more than people: they are the greediest entities on the planet.

  • Report this Comment On February 20, 2013, at 3:51 PM, JKramarz321 wrote:

    If you have a tax holiday again, like 2004, you might as well scrap the tax, since the message will be that we'll do this every 10 years, so just let the money build up. It cracks me up how these companies shrug their shoulders and say "Hey...we're just following the law!" to justify the tine taxes they pay. But now, when they want to repatriate the money, they want to CHANGE those very laws they were so happy with!

    My solution:

    ok, ok..This money will "help the economy, create jobs," etc. Let me swallow the whole line they feed us. ok.

    Starting this year, these corporations can repatriate the money held outside the country prior to this year, and they can bring it back at Zero tax rate, BUT, they can bring it back at the rate of $75,000 for every full time employee (with full benefits) they are employing now.

    They can add another $15,000 for new hires from the last 6 months on, and another $15,000 for new hires who were unemployed for over 6 months.

    Boom! Looks like I just solved a lot of issues and problems, rewarded good corporate citizenship, and did it with THEIR money, not "We The People's" money.

  • Report this Comment On February 20, 2013, at 4:37 PM, mdk0611 wrote:

    1. If you began taxing corporations on worldwide income it would be open season for acquisition of US companies by foreign corporations. Headquarters would be overseas, territorial tax regime would be applied on the corporate parent and US taxation would only be assessed on US operations. Net result would be the loss of headquarters jobs and tax revenues.

    2. IRS has been auditing relative to transfer pricing issues since those rules were tightened by the Tax Reform Act of 1986. The results thus far have been mediocre, but it's not the travesty alleged by slpnm. By shifting some of their auditors from looking at individuals charitable deductions to tranfer pricing issues (assuming those auditors are capable of doing it) things can be tightened up.

    3. It's been a while since I read the Simpson-Bowles plan, but I recall that they proposed a territorial system for "active" trades and business,. This would prevent patents and intellectual properties from being offshored to that one Cayman Island building and should be considered.

    4. If the receipts from the 2004 reduced tax on repatriation (it was taxed at 5%) were used to buy back stock, presumably there would have been tax receipts as a result (presumably) of the capital gains recognized. So it indeed added revenue to government coffers.

  • Report this Comment On February 20, 2013, at 4:43 PM, JKramarz321 wrote:

    Equity said:

    " soak the wealthy as much as he can to pay for entitlements however if you took 100% of the income and entire estates of the top 1% you still would not dent the deficit or budget. This is just math. "

    ok, let's do the math.

    Just looking at Stocks and real estate, the value of those in the US is about $50 Trillion.

    http://www.businessinsider.com/household-net-worth-still-eno...

    The richest 1% own about 34% of the wealth, so just considering stocks and land, that would be $17 Trillion.

    I think that's more than a dent? What numbers were you using?

  • Report this Comment On February 20, 2013, at 4:57 PM, mdk0611 wrote:

    And when ther national debt goes back to $16 trillion on 12-15 years because entitlements are not reformed what do you do then? Take every cent away from the Top 20%? Eventually you will get scooped up by your own criteria. Why wait? Just send everything you've got to the governement right now and avoid the rush.

  • Report this Comment On February 20, 2013, at 5:10 PM, seattle1115 wrote:

    EquityBull wrote: "Obama instead will push to soak the wealthy as much as he can to pay for entitlements."

    Social Security and Medicare are funded entirely by dedicated payroll taxes, which fall disproportionately on the working poor. If Obama is attempting to "soak the wealthy" to pay for these programs, he's doing a poor job of it.

  • Report this Comment On February 20, 2013, at 6:55 PM, mtprx wrote:

    Those taxes go to provide protection to all those companies outside the U.S. borders. If Cisco had a factory in South somewhere attacked I don't think they would call Sweden for military help? No. The tax rates may be too high but these companies must realize that just like the rest of us working stiffs they are supporting a huge dysfunctional apparatus called the United States Government. If these greedy corporate giants would aim for FULL employment, then the tax base would be large enough to lower the corporate rate to match some of these other countries. They benefit from our jobs.

  • Report this Comment On February 21, 2013, at 11:07 AM, cubasteve wrote:

    There are too many Taxes , Accountants , Tax Lawyers , Deductions , Refunds , Allowances .....

    We need a Flat Tax for everyone on everything , i think 10% is possible . No Black Economy , no cash dealings or you get 300% fine , making it understandable by all , fair and not worth cheating the system .

  • Report this Comment On February 21, 2013, at 11:22 AM, ejprzybylski wrote:

    seattle said,

    "Social Security and Medicare are funded entirely by dedicated payroll taxes, which fall disproportionately on the working poor."

    While partially true for social security (for now). Medicare is, in fact, funded mainly by deficits. For every dollar contributed to medicare, the average recipient receives four dollars in benefits. Morgan just wrote an article about it: http://www.fool.com/investing/general/2013/02/13/medicare-a-...

  • Report this Comment On February 21, 2013, at 11:53 AM, famiglia112 wrote:

    As with any tax reform discussion, it's important to consider the benefits of a consumption only tax system, like the FairTax (fairtax.org). Not only would it get rid of repatriation taxes but also corporate taxes altogether. If that's not incentivizing companies to keep business (and jobs) in America, I'm not sure what will.

  • Report this Comment On February 21, 2013, at 12:29 PM, CluckChicken wrote:

    Simple solution to this "problem" the companies can just leave the US and not do business here. You don't get to have all of our benefits (including now being people) and then not play by the rules we have set up.

    Besides we all know what will happen if they get to bring this money back without paying taxes on it, it will be used for huge bonuses for the top management and no investment in the US will actually take place. That is after all what happened the last time we let them do this.

  • Report this Comment On February 21, 2013, at 12:54 PM, Seedye wrote:

    I read somewhere recently that despite the narrative, wealthy people and companies rarely relocate solely because of taxes. Compare Finland and Iceland, for example.

    Flat taxes and consumption taxes seem fair superficially, but they aren't really. They're also less than optimal.

    Fairness: the wealthy get the lion's share of benefit from government spending, directly and indirectly, so they should pay most of the taxes. Flat tax schemes lower taxes on the wealthy. Consumption taxes affect the poorest most, as more of their income goes to necessities; they might spend less total $ than their wealthy neighbors, but they spend a lot more as a % of their income.

    In terms of optimum results, relying on consumption tax isn't so great during a recession, when people cut personal spending long before they lose their jobs. Lowering/raising income taxes on the poor or middle class is pretty much a wash, as it just shifts who is spending the money. Lowering taxes on the wealthy has only a modest stimulus effect ($.35 - $.85 per $1 cut), which shouldn't surprise anyone. Raising the top rates on the wealthiest leaves them as the wealthiest, and just as wealthy relative to their peers, and has a pretty good stimulative effect ($1.05 - $1.85 per $1 raised).

    Even if the wealthiest people and companies wanted to fix the economy by hiring more workers or raising wages, any individual company or person that acted first would be put at a disadvantage relative to their competitors. It'd be irresponsible for a company to start hiring for increased production when demand for their products is lagging. Raising taxes on the wealthiest would put people to work, build the infrastructure and healthy, well-educated workforce needed to grease the rails of future growth, and increase demand, etc.

    In other words, everyone wins!

  • Report this Comment On February 21, 2013, at 1:48 PM, mdk0611 wrote:

    Assuming, for arguement sake and not that I agree, that the repatriated overseas profits were only spent on bonuses for top management. then the US government would pick up close to 39.6% of it via income tax and another .9% from the Obamacare Medicare surcharge. The states would also get a chunk.

  • Report this Comment On February 21, 2013, at 5:55 PM, neelvk wrote:

    How about a simple reform:

    Run the US government like charity. There would be no taxes at federal level. People would be encouraged to put money into the government' kitty (BTW, no salaries or benefits for any elected official). That money would be used to run the government.

    Hey, if lowering taxes is that great, why not be the first country with a 0% tax rate?

  • Report this Comment On February 21, 2013, at 6:02 PM, mindell wrote:

    Yeah well it's hard for me to feel sorry for Cisco and other companies with piles of cash in other countries. Maybe they should just pay the big taxes so they can continue their big executive paychecks. This was why Romney smelled so bad to most US voters. No matter how much money he had, he was looking for ways to stiff the system we all pay into. Hey, if corporations are people, let them pay taxes like people!

  • Report this Comment On February 21, 2013, at 6:10 PM, xetn wrote:

    I love it when I hear the term "fair tax" as if there were or could be any such thing. I only have to ask: "fair for whom?"

    It is certainly not fair for the payer; only the collector (tax consumer).

    The government likes to tell you that paying taxes is voluntary, but just watch what happens if you don't pay. Men with badges and guns come after you and are prepared to kill for the tax money.

    The 16th amendment gave the government the power to tell you how much of your earnings you are allowed to keep. And, it is never enough.

  • Report this Comment On February 21, 2013, at 6:14 PM, TMFMorgan wrote:

    <<The government likes to tell you that paying taxes is voluntary>>

    Who has ever said this?

  • Report this Comment On February 21, 2013, at 6:21 PM, ScottPletcher wrote:

    LOL, these leftists are so silly with this "if corporations are people, let them pay taxes like people" and other such silly claims here.

    Econ 101 again for the leftists:

    Corps don't really pay taxes, they simply collect them. If they need to make, say, a 5% to survive as a corp, and that's what they're doing, and you raise the corp tax 2%, they increase their prices to cover it. ALL business one way or another do that. Otherwise they'd have no profit, and all salaries are paid from profit.

    Btw, the feds claim we have a "voluntary compliance" to the tax code all the time.

  • Report this Comment On February 21, 2013, at 6:32 PM, TMFMorgan wrote:

    ^ It's not thatsimple. People pay for the tax hike -- that's not debatable. But those "people" can vary. Quoting Bruce Bartlett:

    "Probably most people assume that the corporate income tax is largely paid by consumers of its products or services. That is, they assume that although the tax is nominally levied on the corporation as a whole, in fact the burden of the tax is shifted onto customers in the form of higher prices.

    All economists reject that idea. They point out that prices are set by market forces and the suppliers of goods and services aren’t only C-corporations, which pay taxes on the corporate tax schedule, but also sole proprietorships, partnerships and S-corporations that are taxed under the individual income tax. Other suppliers include foreign corporations and nonprofits.

    Therefore, corporations cannot raise prices to compensate for the corporate income tax because they will be undercut by businesses to which the tax does not apply. It should also be noted that the states have substantially different corporate tax regimes, including some that do not tax corporations at all, and we do not observe that prices for goods and services vary from state to state depending on its taxation of corporations.

    That leaves two remaining groups that may bear the burden of the corporate tax: workers and shareholders."

    More if you're interested:

    http://economix.blogs.nytimes.com/2013/02/19/who-pays-the-co...

  • Report this Comment On February 21, 2013, at 11:41 PM, ficklevoter wrote:

    EquityBull wrote, "One reason it will never happen. Obama is never going to let it appear like he gave one company a break."

    Instead of assuming the Prez will veto this type of legislation, let's pass and send it to him. President Obama has only vetoed two bills, one that would have required federal courts to recognize notaries public from any state, including those that hand a notary seal to anyone, and the other a pork barrel spending bill that had no co-sponsors.

    http://www.senate.gov/reference/Legislation/Vetoes/vetoCount...

  • Report this Comment On February 22, 2013, at 2:18 AM, TMFDiogenes wrote:

    I remember that notary bill -- it was a terrible bill... basically someone slipped something supposedly "uncontroversial" past the rest of congress that would have effectively decriminalized robo-signing -- just as the media was starting to figure out that banks were submitting dodgy foreclosure documents to courts.

    solid veto.

  • Report this Comment On February 22, 2013, at 2:37 AM, whereaminow wrote:

    It amuses me that Switzerland has such a drastically lower corporate tax rate than America.

    There's a commenter above (and oh-so-noble boycotter of Cisco products... I guess you'll have to double check Juniper's cash holdings before you switch =D) remarks that the CEO of Cisco should pack up and move to Switzerland if he doesn't like the Land of the Free.

    Um.... I hate to be obvious, but at least in this case wouldn't moving to Switzerland be moving to the Land of the Free?

    David in Liberty

  • Report this Comment On February 22, 2013, at 6:44 AM, verneuker wrote:

    Seems to me what would make more sense would be to reverse it. Tax foreign earnings very steeply, with the proviso that if those funds are repatriated and used in the US economy, those taxes drop to extremely low levels, in essence, rewarding companies for coming to the US, and holding them fiscally accountable for leaving. Also, once you get past the myths and propaganda and look at the facts, President Obama has been extremely pro-business, perhaps not as much as Bush 2 or Hoover, but a LOT more than the sound bites and Fox "News" headlines suggest.

  • Report this Comment On February 22, 2013, at 11:02 AM, moneytrail wrote:

    Morgan -- thank you for your reasoned article that evidences an understanding about how capital flows to environs where it is understood to be a wealth creator and is thus appreciated and encouraged.

    For the rest of the angry, punish success Yahoos (i.e.- punish those who actually create wealth for investors and employees, and encourage corrupt politicians and government bureaucrats to dissipate wealth among the "victim class” to buy votes) who want to suck capital from those who effectively deploy it to create new wealth; read an economics primer and try to understand that successful companies improve the lot of the societies in which they succeed. Whereas, governments destroy wealth and diminish the well being of those unwilling or unable to take the substantial risks associated with wealth creation.

  • Report this Comment On February 22, 2013, at 11:08 AM, TMFMorgan wrote:

    <<in essence, rewarding companies for coming to the US, and holding them fiscally accountable for leaving.>>

    But what are you holding them accountable for? What did they do wrong? Yes, some companies engage in deliberate tax avoidance, routing U.S. sales through a tax haven. But most of it isn't. If Apple can sell a bunch of phones in France, why should it be punished for that?

  • Report this Comment On February 22, 2013, at 11:35 AM, moneytrail wrote:

    Nor is “deliberate tax avoidance” “wrong,” as long as it is legal. Corporate executives who do not employ every legal tax reduction tactic available to augment shareholder equity; and, instead, willfully or negligently allows corporate earnings to be diminished by the payment of excess taxes, should be held accountable to the shareholders for wasting valuable corporate assets.

  • Report this Comment On February 22, 2013, at 1:36 PM, slpmn wrote:

    "If Apple can sell a bunch of phones in France, why should it be punished for that?"

    That's not what's happening...

    http://www.businessinsider.com/how-apple-avoids-paying-billi...

    It's not like they're selling phones in France, paying French taxes, then getting hammered by the U.S. It's really a sophisticated effort to route profits through foreign subs in low tax countries for the express purpose of avoiding US taxes. And otherwise rational people like you want to reward them for it.

    If Apple wants to be taxed like in Irish company, by all means, they should up and move to Ireland. It would not make an iota of difference to the U.S. All their stuff is built in asia and they pay their taxes in Ireland. But they benefit from the protection of the United States court system and the umbrella of the federal govrnment. That's not fair.

  • Report this Comment On February 22, 2013, at 2:41 PM, dmiles2 wrote:

    Morgan quoted Bruce Bartlett:

    "That leaves two remaining groups that may bear the burden of the corporate tax: workers and shareholders."

    I didn't see anyone contest that assertion.

    Since most workers and shareholders are people, I think that actually makes the point that corporations don't pay tax.

    Do you work for a corporation? You share the burden of corporate taxes. Either through increased demands or fewer and smaller raises.

    I assume most of you are shareholders. You carry some of the burden of corporate taxes through reduced valuation of the stock and reduced dividends.

    The corporate tax is just a way of hiding the real size of the burden from most people.

  • Report this Comment On February 22, 2013, at 3:21 PM, moneytrail wrote:

    “It’s not like they’re selling phones in France, paying French taxes…. It’s really a sophisticated effort to route profits through foreign subs in low tax countries for the express purpose of avoiding US taxes.”

    Huh?

    That's exactly what they're doing -- they're paying French taxes, and British, Italian, Japanese and Chinese taxes, along with the taxes of every other country where they do business! (Just as foreign corps pay US taxes when they do business here which explains why foreign corps do as little business as possible in the US)

    Every major industrial country in the world operates in this manner: otherwise known as the Global Economy.

    If US international corporations “re-routed profits” though countries with confiscatory corporate taxes, such as the US, every US international company would either be forced to locate oversees in some evil “low tax country,” or they would be driven out of business by America’s rapacious tax appetite. This would result in even weaker new job creation than that with which we are currently afflicted and, higher prices for Americans! Yet, some Americans are puzzled by the lack of new job creation in the US.

    Amazing!

    I truly hope you have a wise investment advisor who understands this fundamental capital flow concept.

  • Report this Comment On February 22, 2013, at 3:44 PM, dmiles2 wrote:

    Morgan, I don't know if it is still there, but I recall many years ago that there was line in the instruction book for the 1040 that basically said the income tax relied on voluntary compliance. Even then, I had to laugh.

    A tax protester once tried to convince me to join the movement. He told me about one of his colleagues who was arrested one morning by IRS agents with M16's. His lawyer had him out that afternoon, but they had already had the sheriff's sale and his house was gone.

    So much for voluntary.

  • Report this Comment On February 22, 2013, at 3:45 PM, famiglia112 wrote:

    Seedye,

    Sometimes I forget that no one is going to follow the link to fairtax.org and actually read about the FairTax. It is not a regressive tax and actually quite progressive. If you don't spend a dime, your effective tax rate is negative. Spend at the poverty level and it's 0%. So no, a larger percentage of their income will not be going to covering living expenses. As far as I can see, it is the closest system to incentivizing spending within your means and (gasp!) doesn't disincentivize productivity and saving. Say what you want, but those sound like the right incentives to me. On that note,

    "Never, ever, think about something else when you should be thinking about the power of incentives." - Charlie Munger

  • Report this Comment On February 28, 2013, at 10:33 PM, lngtermsense wrote:

    Hmmm, that was a disappointingly naive article, I must say.

    Abandoning repatriation taxes or granting tax holidays do nothing for employment (see historical experience and comments from others on the matter) nor does it help profitability as it will not be used for new hiring or innovation but for share buy-backs and self-enrichment. And worse, it perpetuates costly off-shore maneuvers for tax avoidance. Many if not all large corporations do this already for this reason (See for example Google: http://www.bloomberg.com/news/2012-12-10/google-revenues-she... and taxes are neither paid in America nor in the countries where the profits are earned, but parked off-shore. Periodic tax holidays extorted through lobbyists and misguided article like this one, then effectively remove the corporate taxes altogether. The problem here is not the resulting lower effective tax rate that corporations *actually* pay, but that schemes like these are only available to LARGE corporations as they can afford the lobbying and the complicated accounting schemes involved.

    And this is not making a tax-the-rich argument. In the contrary. The problem here is that the tax avoidance schemes followed by repatriation tax holidays create an enormous competitive disadvantage for small creative companies and innovators, who represent future growth and innovation for America, and who *should* engage in more trade and expand internationally, but cannot afford setting up similar schemes.

    So if you want to do something sensible for growth and innovation in and for America, help reduce red tape, eliminate the economic waste expended on a cottage industry of lobbyists, accountants and off-shore shell operations, all the while also helping large corporations' actual business, then there is a simpler solution: lower corporate taxes in the first place (amongst the highest in the world), instead of encouraging post-hoc sweet-heart deals just for those who can buy the politicians. I am all for lower taxes and encouraging business, but lets do it in a responsible, even-handed manner, that improves long-term competitiveness instead of encouraging more too-big-to-fail monstrosities.

  • Report this Comment On March 28, 2013, at 9:30 PM, thidmark wrote:

    President Obama pro-business??? Can you cite some examples. I haven't been hearing that from the CEOs on CNBC.

    But, hey, you're a true lefty and got your shot in at Fox News. Good boy!

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