Sunday, November 12, 2017

U.S. will lose Corporate Profits and Investment due to Territorial Tax...hear that sucking sound?

After reading the following, you might want to rethink what Republicans might really have in mind for the U.S. economy, and who it benefits...and it ain't you and me:
Center on Budget and Policy Priorities: Under a “territorial” tax system, U.S.-based multinational corporations wouldn’t pay U.S. corporate taxes on their foreign profits. That is, they would face a zero U.S. corporate tax rate, and such a massive, permanent tax advantage for foreign profits over domestic profits would not help the U.S. economy. It would create a powerful incentive for companies to shift profits and investments overseas, could harm many U.S. businesses and workers, and would likely increase deficits. Corporate tax reform should focus on tax policy changes that would help create jobs, reduce deficits, and raise incomes, especially for workers whose incomes have been close to stagnant while corporate profits have soared

The tax avoidance savings that corporations would reap would favor profitable U.S. multinationals, especially those in industries that can easily move profits overseas, such as pharmaceuticals and software.

If a lower U.S. tax rate on foreign profits encourages U.S. corporations to move investments offshore, it could hurt U.S. workers’ wages and productivity. As Congressional Research Service tax economist Jane Gravelle testified before Congress, “[Moving to a territorial system] would make foreign investment more attractive. That would cause investment to flow abroad, and that would reduce the capital which workers in the United States have, so it should reduce wages.”

A zero tax rate on foreign profits would make U.S. domestic and small businesses less competitive relative to large U.S. multinationals.

Claims that cutting U.S. companies’ worldwide tax rate would encourage more firms to locate or keep their tax residence in the United States and thereby increase the number of high-quality jobs at U.S. corporate headquarters are dubious. Currently, whether or not companies can claim U.S. tax residence doesn’t depend on where they locate their management operations.

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