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March 30, 2012

"Global Minimum Tax" Not What I Thought It Was, Or Implied It Was

I was wondering why this wasn't getting bigger play. Some commenters sort of knocked it down, but I didn't understand their reasoning.

Now I get it.

The "global minimum tax" would be levied by the IRS on American companies with foreign components abroad. So if Mexico, say (I'm making up numbers) taxes business at 25%, thus encouraging US companies to move a plant over there, Biden's regime would impose some higher tax, who knows, 35%, with the 10% excess imposed by the IRS and going to the US treasury.

There’s no foreign agency involved. It’s just a new tool for the IRS to reach an American company’s profits no matter where in the world they might be invested. In theory, that’ll eliminate the competitive advantage other nations have over the U.S. by undercutting our corporate tax rates.

But it's still stupid:

In practice, it could lead to more American corporations being sold to foreign investors: Because the U.S. only taxes the profits of U.S. companies, one way to dodge the new “global minimum tax” would be to invite a takeover by a foreign company. Which, depending upon how high the new minimum tax is and how many companies flee, could mean less overall tax revenue than before. But then, what’s another $100 billion in the hole when you’re already running deficits in the trillions?

The simple fact is that our rates or too high to be competitive. Rather than lowering our rates, Team Obama's answer is what it always is: Let's raise rates even higher, even on plants in foreign companies.

The competitive disadvantage imposed by high American corporate tax rates can be abated by either lowering the rates, or by jacking up the effective tax rates on foreign plants.

Color me shocked Obama's choosing the "Higher Taxes" route again.

Romney attacked:

“Raising taxes on American job creators is apparently not enough to satisfy President’s Obama’s trillion-dollar spending addiction. Instead of promoting pro-growth tax policies that provide businesses with the economic freedom to grow and prosper, he is backing a ‘global tax’ that would harm American competitiveness,” Romney said in a statement released by the campaign. “My plan to reform the tax code by cutting rates and encouraging reinvestment here in America is the right way to jumpstart an economic recovery and create new American jobs.”

Romney's a smart guy. I assumed that he, unlike me, knew what Biden was talking about.

Note he doesn't allege the misinterpretation I had. He's factually accurate. Nevertheless, he puts that "global tax" on the table. He doesn't define it. Just leaves it at "global tax."

So people can draw their own conclusions. And if they draw a conclusion that's not quite accurate, so be it. He hasn't tied himself to that conclusion, but he... leaves it out there.

It's not his job to teach Joe Biden how to speak.


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posted by Ace at 04:58 PM

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