So all right. I’m not an economist. I don’t have any letters after my name so I’m talking from a pure common sense perspective here. After reading about how our tax policies encourage corporations to invest in jobs overseas, I have a suggestion for economists to mull over and poke holes in. The Harvard Tax Policy Law Center suggests one solution – institute a policy of taxing profits held in tax havens and low-tax countries for the difference between what they pay in those countries and what they would pay here.
I have another suggestion to incentivize businesses to move their base of operations back here to the good old USA. Give them a chance to cut their tax liability in half. That’s right. You’re hearing me right. I am advocating completely cutting corporate income taxes in half for big business under this plan. Here’s the specifics (and remember, I know that there are very likely huge holes that could be poked in this. I understand that it is not taking many other things into consideration. I offer it for discussion and as a talking point.)
Let’s amend the progressive income tax to a graduated corporate income tax pegged to their investment in the U.S.A. job market. Set up a system with a single tax rate – but adjust the percentage of profit taxed to the percentage of the company’s jobs that are here in the United States.
Under my plan, if your company earned $100,000 in profit and 100% of your jobs are here in the US, you pay taxes on 50% of your income. That’s it. You get to keep half of your money completely tax free. For every percentage of your job equity that is sent overseas, you pay taxes on another .5% of your profits. Thus, if your company earned $100,000 and 50% of your jobs are overseas, you’ll pay taxes on 75% of your income. If 90% of your jobs are overseas, you’ll pay taxes on 95% of your income.
However, it also requires a change in another aspect of the tax code to really drive it home – the part of our tax code that encourages big businesses to keep their profits (and move their profits) overseas. That needs to be addressed – we MUST remove the incentive for companies to move their jobs and keep their profits overseas instead of bringing them home and spending them here.
First, the basic concept that you have to understand is this: multinational companies – companies who do business in foreign markets – are required to pay taxes to that foreign country on the income earned there. They are not required to pay US taxes on those profits AS LONG AS THEY DO NOT BRING THE PROFITS HOME. In other words, as long as those profits are held in a foreign holding company and not attributed to the US company, there is no need to pay US taxes on them. In addition, there are ways to shift US profits to offshore companies and avoid paying US taxes.
Next, let’s take a little side trip to the web site of a company that helps US companies take advantage of all the tax breaks they’re allowed under US tax policies. Here’s a few excerpts:
Foreign Tax Credit Maximizer | Maximize a US taxpayer’s ability to use foreign taxes that the taxpayer’s foreign activities are subject to, as tax credits against the US tax liability.
In other words, if a company pays foreign taxes to a foreign country on earnings in that country, the amount of the tax can be deducted against the amount of tax that they pay in the U.S. Yes – income should be taxed once and only once, but it should be taxed fairly.
Transfer Pricing | Let us assist you with intercompany pricing studies and analysis to support intercompany pricing strategies. We know what various countries’ tax authorities around the world (including the US) will accept as intercompany pricing for goods and services without being subject to punitive costs.
Transfer pricing is one way to shift income earned in the US to companies owned in foreign countries where it is taxed at a lower rate.
Cross Border Transaction Analysis | We can provide tax planning with respect to a US company’s acquisition of a foreign company or a foreign company’s acquisition of a US company to optimize their tax position. Alternatively, we can reorganize a US company’s foreign activities/structure or a foreign company’s US business activities/structure to obtain significant tax savings.
Captive Insurance Company Tax Structuring | Proper planning can help ensure deductibility of premium payments and ensure the most tax efficiency out an offshore captive insurance company.
“Double Dip” Financing Structure/Super Holding Company Structure | Optimize a company’s interest deductions to obtain two deductions (one in the US and one in a foreign jurisdiction) and/or to shift income from a high taxed jurisdiction to a very low taxed jurisdiction to lower worldwide effective tax rate.
Offshore Intangible Holding Company | Companies that own and/or plan on developing various intangible assets for exploitation offshore can use this planning technique to lower their worldwide effective tax rate by “trapping” royalties in low taxed jurisdictions.
Okay? Got that? We are subsidizing companies who take jobs overseas and follow the letter of the law in order to maximize their profits – and in many cases, actually CHEAT the US taxpayers.
Why the hell do we work against our own interests here? Why does government work against the interests of most people in this country in order to benefit a very small slice of the top of the heap? And why, why, why do people BELIEVE that this incredible travesty of a tax code is IN THEIR BEST INTEREST?
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