Interestingly, the economists cited believe that such a tax increase would have little impact on corporate behavior — i.e., it would probably not lead to many corporate inversions (i.e., reincorporations of U.S. corporations to foreign jurisdictions) — and would have little impact on U.S. jobs because these taxes would primarily affect corporate stockholders. The idea that taxes will not affect corporate behavior is silly. Corporations exist to earn a profit for their shareholders. When profits are impaired, corporations either cease to exist or they move — period. When that happens, not only will corporate shareholders lose, but also employees will lose and the U.S. government will lose tax revenue. A lose, lose, lose plan by the “I got a plan for that” candidate.
At last, thanks to Sen. Elizabeth Warren (Mass.), a candidate for the Democratic nomination for president, we have someone with fortitude to propose an end to this egregious corporate welfare subsidy to large multinational corporations. Individuals and families pay a higher tax rate on any foreign income, but multinational corporations have increasingly shifted taxable income to tax haven countries through creative schemes to avoid U.S. tax.
This provision in the tax code of deferring foreign income until it is remitted back to the United States was intended to provide an incentive for U.S. exports, but with globalization, this extra incentive is unnecessary. In fact, it induces unhealthy “transfers” of profits to countries that keep their income taxes low solely for this purpose. Besides, the provision was intended to be a tax deferral, not tax avoidance.
As to the argument that U.S. multinationals would “invert” to a foreign country, the United States should collect the entire balance of “deferred” tax on past foreign income if a corporation inverts from the United States.
Corporations should pay their fair share of taxes. Eliminating this unnecessary subsidy would be fair and appropriate.