Archive for May 7, 2009

eyes glaze over

Posted in Uncategorized on May 7, 2009 by urstupidnourstupid

I know your eyes glaze over but I want to go over our corporate tax policy and explain why Obama’s corporate tax plan is bad business.

Suppose an American company wants to make widgets in Ireland. And let’s suppose a German company has the same idea. Suppose they both build a factory and sell a bunch of widgets and each show a profit of 10 million. The German company will pay the 12.5% corporate tax that Ireland requires and then brings that money back to Germany. They can invest in more research, hire more people or just pay a dividend to their shareholders. The American company has to take another route. If they try to bring this money back, they are subject to State and Federal taxes. Federal is 35%, average State tax is 3%. They get a credit for the tax they paid Ireland but it is still substantial. So rather than bringing this money home and investing it in the U.S., they leave it overseas for additional investment in Ireland. The estimate is approximately 10-13 trillion that is held overseas.

Now Obama wants to tax corporations whether they bring these funds back to the U.S. or not. The only recourse will be for corporations to move their corporate headquarters overseas where their money remains untaxed from the 2nd highest corporate tax in the industrialized world. I would prefer to remove the tax burden and let this money funnel back here so that it can stimulate the economy.