Let’s Savor the Feeling of Victory

by Dan Mitchell

The past nine years have been discouraging, with Bush and Obama both being big-government interventionists. But it’s nice to know that the other side still has a hard time imposing higher taxes. The Wall Street Journal’s editorial page celebrates the death of a terrible tax proposal that would have increased double taxation on American companies trying to earn market share while competing abroad:

Raising taxes on the overseas profits of American firms has been a central plank of Barack Obama’s agenda since his campaign for President in 2008. The proposal was featured in the President’s budget in February and was the focus of a May speech in which he said that corporations were “shirking” their responsibility to support his huge increases in federal spending through higher tax payments. But as this newspaper reported Tuesday, the Administration appears to have shelved the plan to limit business use of the current deferral of taxes on profits earned overseas. This climbdown comes after a full-court press by U.S. multinationals, notably including some of Mr. Obama’s Silicon Valley supporters, which argued that raising taxes on U.S. companies abroad would do nothing to create jobs in the U.S. while undermining American competitiveness overseas. The U.S. is one of the few developed countries that even tries to tax corporate overseas profits. Most operate on a territorial system, in which business profits are taxed in the country in which they are earned. The U.S. taxes world-wide income but then allows a deferral of overseas taxes until those profits are repatriated. It also allows companies to take a tax credit for corporate taxes paid in other countries, although this tax credit system is cumbersome and only partially offsets the burden of double taxation. The idea that raising corporate taxes would promote job creation never made sense, and the mere threat of higher taxes is one factor depressing business investment and slowing any recovery. So it’s good news that the Administration seems to have set this job-killer aside, at least for now.

See here for more information about the issue.


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Posted Oct 24th 2009 at 12:19 pm in Congress, Economics, News, Obama, Politics, Tax Reform | 18 Comments