Bill Wilson, Americans for Limited Government:
The lesson learned from Smoot-Hawley was that just because a law — in this case punitive tariffs on imported goods to boost domestic consumption — has good intentions, does not mean it will have good outcomes. Often, there are unintended, real consequences to economic policies that must also be considered alongside the stated goals the political class offers for their schemes.
Fast-forward to 2010, where Congress is now considering what can only be called the “Reverse Smoot-Hawley Act.” Today, the Senate is expected to vote on a bill that will limit the use of the Section 956 foreign income tax credit by U.S. companies that operate overseas.
No longer seeking to inflict punishment on foreign competitors, now Congress wants to inflict pain on American companies. Proponents argue that because the U.S. levies higher corporate taxes — 35 percent in the top bracket — than the rest of the world (except Japan), that American companies that make profits overseas and pay taxes at a lower rate there are not paying their “fair share.”
Let’s say an American company rakes in $20 million in profits abroad, and pays $5 million in corporate taxes over there at 25 percent. Right now, the company gets to keep the $15 million without being double-taxed on corporate profits. But the federal government is not happy. It’s thinking it would have gotten $7 million in taxes if those profits had been generated at home, and therefore that it is entitled the $2 million difference.
Proponents think they are removing an incentive to do business overseas in what they call “tax havens.” In fact, increasing taxes on foreign profits will remove an incentive to do business here, especially if a majority of a company’s profits are generated overseas. The incentive will become to simply keep the profits abroad, or even to wholly shift operations there.
Four left-wing nonprofit groups, posing as small business advocates, estimate that closing this “tax gap” will generate $37 billion in new revenue from $149 billion of overseas profits.
But, instead of the federal government gaining $37 billion in revenue as supporters of the legislation pretend, the U.S. economy will more likely lose the $149 billion in capital flows that are never repatriated. Why?
This is essentially a tax on account transfers from any money earned overseas, or a tariff on capital flows, if you prefer. It’s a perverse incentive that will harm those capital flows back into the U.S., much of which are generated by exports. U.S. companies that operate overseas account for nearly half of all American exports, and employ 22 million people. But now they will be put at a woeful disadvantage to foreign competitors that will not be subject to similar double-taxation in thier home nations.
Eliminating the foreign income tax credit for American companies will cost the U.S. jobs, exports, and even whole companies, which will increasingly be shifted abroad. It will also cost the U.S. critical investment capital that could instead be devoted here at a time when the weak recovery is slowing down and unemployment remains high.
These unintended consequences are the Smoot-Hawley of our time, and the responsibility for shipping investment capital and jobs overseas will be borne by those U.S. Senators that today cast their votes in favor of it.
The responsibility, yes. But not the consequences.
The consequences will be to destroy the petite bourgeouis (who evince a crass desire to rise above their station), and once again ensure that the US has a recognizable ruling class of effete elites — with the rest of us subject to its whims.
****
And, just like that, it’s done.
ALG’s response:
“Harry Reid’s Senate today voted to increase unemployment and reduce future capital investment into the U.S. to pay teachers union bosses in a few key states,” [ALG President Bill] Wilson said, noting that the bill will limit the use of the Section 956 foreign income tax credits for profits generated overseas, “money which now will simply not be repatriated into the economy.”
The cloture vote on the legislation was 61 to 38, with Republican Senators Susan Collins and Olympia Snowe joining all 59 Senate Democrats.
“The American people will be harangued over the next few weeks about what a wonderful thing the Senate has done when, in reality, we have drastically increased the burden on American workers, taxpayers, and businesses,” Wilson added.
“Out of the estimated 3.3 million public school teachers nationwide, teachers unions were expecting 160,000 layoffs this year — just 4.8 percent of all teachers. 38.1 percent of those layoffs are centered in just three states: 9,000 in New Jersey, 16,000 in New York and 36,000 in California,” Wilson noted.
“If you take those 160,000 teachers, and assumed only half are unionized — which is very conservative — with contributions to state and local unions averaging $300 per teacher, and another $162 per teacher to the National Education Association or $190 per teacher to the American Federation of Teachers, and the Senate just voted to give $40 million to the public teachers unions’ political coffers, which will be mobilized into campaign ads, direct mail, phone banks, you name it, all to elect Democrats”
They’re doing this just as America is becoming an increasingly less-important market for aircrafts and autos and even movies. There’s lots of people what can afford to say fuck off fagmerica and make a healthy margin elsewhere, and I think if they have any self-respect that’s exactly what they’ll do.
That whirring noise you hear? Santayana spinning in his grave.
British Empire deja vu?
hmmm. Maybe I should take another look at this Carly person.
How do we know the consequences are unintended? They seem to want to destroy American businesses, and this will help.
I’ve been rereading The Forgotten Man lately. The blog today reads like a real-time supplement.
I’m still trying to figure out the 1930’s version of Jake Shannon.
this guy kinda works
I love how they claim to want to promote manufacturing when all they really want to do is tax the people that are doing things they do not like.
Visually he works. But Fritz Lang had some discernible talent so no dice.
If I were an entrepreneur(USA) starting a new IT or web company I would home base it in the British Virgin Islands. All my “employees” would be contractors working from home offices. Can you say “tax avoidance”, yes, I knew you could.
Obama has taken over the most popular high end restaurant franchise and says “If you want to eat here, you’re going to have to pay even more now. OK? Now, how much shit do you want on your sandwich?”
The Antilles are good too and then you can be an NV.
Aruba, Jamaica, ooh I wanna take ya…
The Rookie Blue epaulets bear the crown. They don’t have any need to pretend any longer.
Missy is a for reals Canadian.
I know. My only point is that oh, six years ago they’d have pretended to be in X US city.
yes you are right and six years ago Team GI Joe would have been made of for reals Americans
I wonder what the real change in revenue would be if you cut corporate tax rates to zero (or some very small amount), and convinced businesses that you would never change that. How many businesses would either return to our shores or never leave them? How many more people would be employed as a result, and therefore how much more tax revenue would you be able to extract from the employed? I have the feeling there would be a net increase in revenue, which is really all a government should care about, rather than caring about any sense of “fairness.”
Even if it were a foreign business located in the U.S. that sent its profits home, you still have a cascade effect because they would be employing people locally, and also creating jobs for people who provide services (restaurants, for instance) for the employees. I really cannot see a downside to this, other than for the various governments who get to hide taxation on the citizens by taxing the businesses, which always pass on their costs to the people.
There is an even greater lesson still to be learned from Hoot-Smalley.
In any case, the Tree of Liberty has been looking a little parched lately.
Oh. Wow. How come I didn’t know that we have one of the highest corporate tax rates in the world? I had to go check. It’s not bad enough that the top bracket goes to 35% at incomes over $10M; it’s that it’s 34% between $75k and $10M.
Remember There Will Be Blood?
Imagine a US President standing before the UN General Assembly saying, “I… drink… your… milkshake!”
I really cannot stand trolls that just spam links to uber-leftist websites.
Slartibartfast: Corporations count as people now.
It’s only fair.
Corporations, which are nothing but people in association, count as people then? Wow, spooky.
Softball league, meya, look into it.
sdferr – You don’t think that actual thought went into that trollie thingie’s comment, do you ?
Corporate taxes hit 34% at income over $75k.
Personal income tax exceeds 34% for income over $372,950.
Methinks there is something amiss, there. Marginal personal income tax for income over $75k (until the next bracket kicks in at $171,550) is 28%. Well, some of it falls in at 25%, but not enough for me to care.
Corporations are being treated more harshly than people, tax-wise. No wonder they want First Amendment rights.
It is evil for corporations to give voice to their concerns. Evil, I tell you. Evil. They should be taxed into submission, now, and forever.
One of my best friends grew up with a guy who is now the CEO of a ginormous apparel marketing firm. They have been in talks for almost a year to move the bulk of their Multibillion dollar operations overseas, possibly to Switzerland. Steve Wynn is in the process of moving his corporate headquarters to Macao. Both state the reason for the moves as an administration and a Congress that provides nop stability, hates businesses and can’t be trusted.
Inmates, asylum, you get the picture.
How many names is this kkkrazy lunatic going to use today?
Time for some more comment-deletions, methinks.
How loopy do you have to be to spam blogs you don’t like with stupid comments under different names on a daily basis? I would think one would have to be seriously off-kilter.
You say loopy, meya sez konstitushunal. Don’t be dissin meya, now.
What a sad loser. I’m sure on my death bed, I’ll be wishing I spent more time… trolling.
I would, snarky, but I need to consult with my “corpse man.” I’m not sure which of the 57 states he currently occupies.
No, because you waste bandwidth. If you cannot be factual, or interject something useful that might cause a discussion, you could at least try to be entertaining.
BTW, I have you TrollHammered, so I don’t see your blather unless I feel like looking. So, see ya later… not.
Just remember that “meya” is a twelve year old boy who wishes he were a thirteen year old girl trapped inside an adult hermaphrodite. And as far as names go, since it’s half-honest, “snarky elitist” is as close to truth in advertising as we’re likely to get from the chest-waxing, open collar unbottoned shirt-wearing, jew-fro’d coprophiliac.
That’s not a point; that’s a question.
A stupid question, to boot. One that’s predicated on something that has a zero probability of ever happening.
ooh. burn.
So, meya. On a scale of 1 to 10, with 1 being pathetic and 10 being very very very very very very very very very very pathetic, where would you rank yourself?
Bugger off, meya.
prate on, elitist, prate on.
Keith Hennessey does some useful summing.
Another polluted thread. And on top of that, Mr. LaRoche has got that fuckin’ song stuck in my head. Thanks.
Moron meya has no idea how the constitution works. What a surprise.
Really? That’s news to me.
Oops, sorry for the accidental torture!
Meya – On a scale of 1 to 10, with 1 being pathetic and 10 being very very very very very very very very very very pathetic, where would you rank yourself?
I’m still waiting for the point. Where was that headed?
BTW, if you’re betting that there would be a repeal, better get some odds.
Now the angry vile personality has come out to play.
Somebody who uses a hundred user names and fifty IPs to hide his identity — only to leave a pic of himself that reeks of teen spirit and a brief stint as a master’s degree student in French lit — really shouldn’t be calling anyone anything.
Except, were he to call himself a giant pussy, I guess we could let that stand. For the candor.
The stint might have been brief, but I’d bet he has quite the collection of scarves and berets to show for it.
No doubt he has a beret, and black skinny jeans.
Could be booze. Doesn’t the butch asshole persona normally emerge in the evening?
Yes, bh, you are correct.
cranky-d
OCD.
Did I miss it? I went to the link on the cloture vote that you had added in the update, but I couldn’t find the provisions in this bill that stipulate what the ALG article stated.
Of course, I only skimmed the bill summary, as I don’t have the time (or legal training) to understand the ENTIRE text of the bil, so perhaps I missed it…
Lord knows, our “legislators” don’t read the handiowork of their staffs (and their lobbist masters)!!