“Global minimum tax” is not a new tax increase suggestion, having been floated about by Obama and Biden since January 2012. However, in a fresh version of “open mouth, insert foot”, Joe Biden told a group at a manufacturing plant in Davenport, Iowa, on March 28, 2012, that the Obama administration wants to lower corporate taxes by 20% by raising what he called “global minimum tax”. They’re talking about tweaking the U.S. tax code so that American companies have less incentive to outsource. Said a White House official, “He was referring to our proposal in the Blueprint for an America Built to Last that removes tax incentives for companies that ship jobs overseas.” Here’s the relevant section from the White House fact sheet:
At the same time as the President is calling for immediate enactment of this plan, he is also pushing forward on a framework for corporate tax reform that would encourage even greater investment in the United States, while eliminating tax advantages for outsourcing. This framework will include:
Making companies pay a minimum tax for profits and jobs overseas and investing the savings in cutting taxes here at home, especially for manufacturing: The President is proposing to eliminate tax incentives to ship jobs offshore by ensuring that all American companies pay a minimum tax on their overseas profits, preventing other countries from attracting American business through unusually low tax rates. The savings would be invested in cutting taxes here at home, especially for manufacturing.
Wow, imagine what a wonderful situation that will create for US corporations. A new Obama tool for the IRS to reach American companies profits no matter where in the world they might be invested. The idiots at the White House think that this will eliminate the competitive advantage other nations have over the U.S. by undercutting our corporate tax rates. In practice, it will lead to more American corporations being sold to foreign investors because the U.S. only taxes the profits of U.S. companies. The way savvy organizations will dodge the new “global minimum tax” would be to invite a takeover by a foreign company. So, dozens or hundreds of US companies, will leave, further reducing tax revenues and killing American business. Great, yet another huge budget deficit creating program…what’s another $100 billion hole when you’re already running deficits in the trillions?
According to Vice President Joe Biden, it’s the answer to spur manufacturing in the United States: “For years, American manufacturers have faced one of the highest tax rates in the world. We want to reduce that by over 20%. We want to drop the rate, particularly, for high-tech manufacturers like you, Mr. President, even further than the 20%. “We want to create a global minimum tax, because American taxpayers shouldn’t be providing a larger subsidy for investing abroad than investing at home.”
The problem is, America’s corporate tax rate is already the highest in the world. President Obama’s corporate tax reform plan would wreak havoc on corporate growth and investment.
Heritage Foundation’s J.D. Foster says the consequences of the President’s policy: “His new proposal starts strong by reducing the federal corporate income tax rate to 28 percent from the current 35 percent. This is a good and long-overdue policy change. Regrettably, he marries rate reduction to a net corporate tax hike based in part on extending his policy to hammer and ultimately deconstruct U.S. multinational companies. The net effect is that his corporate tax reform would do more harm than good, representing yet another missed opportunity to help American workers”. The President’s plan punishes firms that outsource jobs by taxing foreign earnings, with the goal of encouraging them to “insource” in the United States. However, Foster believes that the policy would have the opposite effect and profitable multinational corporations would become ripe for sale to overseas companies who will buy the assets and escape Obama’s tax penalty making U.S. companies bigger targets for international takeover.
Foster recommends a very different approach: “The right solution is to pursue a revenue-neutral corporate tax reform, reducing the corporate tax rate as far as sound base broadening will allow. At the same time, in international matters the U.S. should move in exactly the opposite direction from what President Obama proposes so that U.S. companies can compete globally and not become tax-induced targets for foreign acquirers”.
This tax is stupid. The fact is that our corporate tax rates are too high to be competitive. Rather than lowering tax rates, Obama’s answer, again, is raise tax rates even higher, even on plants in foreign countries. If we lower corporate tax rates on American manufacturers, more plants will reopen. Another thought would be to increase the effective tax rates on foreign plants.
We need a change! The current administration is so indoctrinated into socialist thinking that all that they do leads to more government, weaker business and a poorer America. Vote Obama and his socialist regime out. Let’s regain the America that our founding fathers envisioned.