The Gang of Six isn’t satisfied by screwing over Social Security and Medicare, and imposing sneaky tax hikes on workers with the Chained CPI. They want to give billions of dollars in tax savings to the richest corporations in the US, and encourage them to move jobs overseas. That is the logical result of changing to a system of taxing income only if it is “earned” in the US. This is called a “territorial taxation” system. Currently we have a hybrid system. We tax income from whatever source, but we give a credit for foreign taxes on the income, and we don’t tax any of the money until it is repatriated.
The territorial tax will delight these monster corporations that have accumulated billions of untaxed profits overseas. They can invest the money off shore to create any new business they might want to enter, in any country they might like, and with little effort completely avoid US taxation. This removes any reason for any corporation to manufacture in the US for export. As soon as possible, the company simply moves production off shore, and uses tricks to make the profits in some low tax country. Jobs leave, exports drop, and so do tax revenues.
The rich benefit from higher stock prices as the profits of their pet corporations rise,. When they sell off the stock, they only pay at the low capital gains tax rates.
The US Chamber of Commerce and many of the anti-American corporations it represents are begging congress to enact a one-time repatriation with at 5% tax rate. Their web site is the patriotic WinAmerica, with a lovely picture of working Americans, you know, the people expected to make shared sacrifices. That is a tough sell in light of the howling about the debt ceiling. Even our corrupt elected representatives are having trouble saying that this is a jobs measure, when we know from recent experience that it is just a devious way to give more money to the rich, and increase their leverage over US workers at the same time.
The best part is that in the uproar of trying to increase taxes on workers and screwing Social Security recipients, this little provision won’t attract any attention. The New York Times and the Washington Post don’t mention it in today’s stories. Of course, the business press spotted it immediately. Here’s Bloomberg:
The proposal also calls for the Finance Committee to switch to a territorial tax system, under which U.S. multinational companies wouldn’t face taxes on income they earn outside the country. The U.S. Chamber of Commerce and other business groups have been urging Congress to make such a change.
Senator Ron Wyden, an Oregon Democrat who has proposed his own bipartisan tax-code overhaul, said yesterday that driving rates down that far would require making big changes to breaks that many taxpayers enjoy. Those include the mortgage interest deduction and the deduction for charitable contributions.
“You would have to cut back very dramatically on some of the middle-class tax incentives,” he said.
And, of course, Wyden is right. The bandits in the Gang of Six include this instruction to the Senate Finance Committee: “Reform, not eliminate, tax expenditures for health, charitable giving, homeownership, and retirement….”
Reuters has a good summary of liberal dismay over this provision. The Hill notes The Business Roundtable’s enthusiastic support, and quotes Rich Trumpka of the AFL-CIO making the point that this system encourages export of jobs, not goods and services.
“We need to keep asking our leaders: ‘Who got us into this mess?’ It wasn’t working people. The people who got us into this mess are getting off scot-free, and this Gang of Six proposal shows they have accomplices in both parties.”
The Pretend Democrats couldn’t care less who caused this mess. Working people have to pay, in higher taxes and fewer and worse jobs. Better they should suffer and die than that Dick Durbin should have to tax his precious contributors.