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President Obama talks about closing corporate tax loopholes and taxing companies who move profits offshore. He calls this 'shared sacrifice". This kind of talk makes for a good class warfare political talking point, and Obama repeats this kind of stuff endlessly, but there's much Obama fails to tell us. Some of what Obama conveniently forgets to say was brought up on CBS' 60 Minutes program last night, in a repeat of a report it aired in March. 60 Minutes reported on corporate tax havens:
"Our government is in knots over ways to lower the federal budget deficit. Well, what if we told you we found a pot of money - over $60 billion a year - that could be used to help out?
That bundle is tax money not coming in to the IRS from American corporations. One major way they avoid paying the tax man is by parking their profits overseas. They'll tell you they're forced to do that because the corporate 35 percent tax rate is high in relation to other countries, and indeed it seems the tax code actually encourages companies to move their businesses out of the countryAmerican corporations. One major way they avoid paying the tax man is by parking their profits overseas. They'll tell you they're forced to do that because the corporate 35 percent tax rate is high in relation to other countries, and indeed it seems the tax code actually encourages companies to move their businesses out of the country.
Obama and his fellow liberals would dearly love to get their hands on that $60 billion in overseas corporate tax revenue. No doubt about that. They talk about it all the time. Some Republicans talk about it too. What the liberals generally don't talk about is WHY all those profits move to overseas tax shelters in the first place. One big reason is the USA's sky high corporate tax rates. What Obama also doesn't mention is that if we do his bidding and remove the corporate tax loopholes, while still leaving our corporate tax rates the highest in the world, the only thing we'd be encouraging is for MORE companies to relocate overseas. Talk about counterproductive. I thought the idea was to attract business to our shores, not to drive it away. Obama might as well take out an ad touting the USA as the 'anti-business capital of the world'. When I hear Obama talking about "shared sacrifice", I think about all the jobs and American wealth he wants to sacrifice. We'd certainly all share in that loss.
Another thing Obama fails to mention is what has happened in the past when the government tried to collect overseas corporate taxes:
Congress tried to put a stop to that with a law passed in 2004, mandating that any company that wanted to move offshore would still have to pay the 35 percent. But because of loopholes in the tax code, companies can substantially lower their taxes by moving chunks of their businesses to their foreign subsidiaries.
The result of the 2004 law was that companies moved even more of their operations overseas. Again, talk about counterproductive.
Here's the reality of the situation in the world today:
"We are dealing with a tax system that is a dinosaur," Cisco CEO John Chambers told Stahl.
One CEO who would talk to us was Chambers. Cisco is the giant high tech company headquartered in San Jose, Calif. He says our tax rate is insane. It's forcing companies into these maneuvers, especially when many other industrialized countries including Canada are busy lowering their tax rates in order to lure our companies and our jobs away.
"Every other government in the world has realized that the U.S. has it wrong. They're saying, 'I'm going to have lower taxes, period.' That's what you see all across Western Europe, that's what you see in Asia in the developed countries," Chambers said.
When asked if he's judged as a CEO on issues like taxes, Chambers said, "Absolutely."
He's been expanding Cisco overseas because of growing demand abroad, but also to lower the company's taxes: their average rate over the last three years was just 20 percent.
Economist Martin Sullivan says it's standard operating procedure for companies like Cisco. "U.S. multinationals are shifting their research facilities, shifting their manufacturing facilities, and shifting some regional headquarters into Switzerland and into Ireland. And those are massive numbers of jobs," he told Stahl.
Sullivan says Ireland taxes corporations at just a third of the U.S. rate, so no wonder the outskirts of Dublin look like Silicon Valley. Many well-known companies are all but obliged to go abroad.
"Well, if you have a 35 percent rate in the United States and, for example, a 12.5 percent rate in Ireland, there's a incentive to move your factory to Ireland," he explained.
"Six hundred American companies are in Ireland and they employ 100,000 people," Stahl pointed out. "Those are jobs that aren't here. And they moved to Ireland because of taxes."
"The U.S. Treasury in effect is subsidizing investment in Ireland," Sullivan said.
"Why isn't everybody in Ireland if it's that great?" Stahl asked.
"Almost everybody is in Ireland," Sullivan said. "All the pharmaceutical companies, all the high tech companies. You're stupid if you're not in Ireland," he replied.
"We notice that you have an awful lotta companies in Ireland," Stahl told Cisco's John Chambers.
"Yes we do," he acknowledged.
By Stahl's count, Cisco has eight companies in Ireland.
"We do what makes sense to the shareholders," Chambers said. "We go where there are incentives in countries that say, 'We want you here, we're going to give you tax advantages, and we want you to add jobs here, etc.' We can no longer in America say, 'This is how we do it, therefore you must do it.' We've gotta change, or we're going to be left behind."
That's good for Ireland, but not so good for us. If our biggest problem is jobs (and it is), then why the hell are we continuing policies that drive jobs away ? That isn't shared sacrifice, it's shared stupidity. And how much money are we talking about that is sitting overseas ???:
Chambers told Stahl Cisco has almost $40 billion overseas that could be brought back to the U.S.
The total amount of money U.S. companies have trapped overseas is $1.2 trillion. Chambers is advocating for a one-time tax break to allow them to bring that money home at a rate of, say five percent. That would, he says, stimulate the economy and create jobs.
As Obama leaves on his bus tour to "pivot to jobs" (about the 15th time he's made such a pivot), maybe this time he could try something that actually would work - dropping the corporate tax rate dramatically. Unless, of course, he really doesn't give a damn about the American people he's hurting.