What’s competitiveness got to do with it? Absolutely nothing

Posted: 19 August 2014 in Uncategorized
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To listen to the leaders of American corporations, their lobbyists, and their friends in economics, U.S. corporations are losing out in the competitive battle with foreign corporations because they face tax rates that are much too high. Therefore, they are “forced” to engage in tax inversions unless and until corporate tax rates in the United States are lowered.

I’ve explained before (e.g., (here, herehere, and here) how actual corporate taxes are, in fact, much lower than the mjuch-ballyhooed statutory rate. But you don’t have listen to me. Let Edward D. Kleinbard, a professor at the Gould School of Law at the University of Southern California and a former chief of staff to the Congressional Joint Committee on Taxation, explain how the United States tax code is not impeding global competitiveness. In fact, he argues, the opposite is true.

The recent surge in interest in inversion transactions is explained primarily by U.S. based multinational firms’ increasingly desperate efforts to find a use for their stockpiles of offshore cash (now totaling around $1 trillion), and by a desire to “strip” income from the U.S. domestic tax base through intragroup interest payments to a new parent company located in a lower-taxed foreign jurisdiction. These motives play out against a backdrop of corporate existential despair over the political prospects for tax reform, or for a second “repatriation tax holiday” of the sort offered by Congress in 2004.

The problem in the United States is not an anti-competitive tax structure. It’s that more and more of the surplus captured by American corporations, which could be taxed to pay for government expenditures, is beyond the reach of federal authorities. The result has been to shift more and more of the federal tax burden onto individuals—onto rich individuals, who like American corporations find all kinds of ways to shelter their income, and onto poor ones, who simply can’t pay any more than they currently are.

Something’s got to give—and American corporations, their lobbyists, and their friends in economics are working hard to make sure corporate profits remain in the hands of a few.

Comments
  1. […] as I have explained before, U.S. corporations are not losing out in the competitive battle with foreign corporations […]

  2. […] as I have explained before, U.S. corporations are not losing out in the competitive battle with foreign corporations […]

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