Whether it’s American politicians trying to extort more taxes from Apple or international bureaucrats trying to boost the tax burden on firms with a global corporate tax return, the left is aggressively seeking to impose harsher fiscal burdens on the business community.
A good (or “bad” would a more appropriate word) example of this thinking can be found in the New York Times, where Steven Rattner just wrote a column complaining that companies are using mergers to redomicile in jurisdictions with better tax law.*
He thinks the right response is higher taxes on multinationals.
While a Senate report detailing Apple’s aggressive tax sheltering of billions of dollars of overseas income grabbed headlines this week, …the American drug maker Actavis announced that it would spend $5 billion to acquire Warner Chilcott, an Irish pharmaceuticals company less than half its size. Buried in the fifth paragraph of the release was the curious tidbit that the new company would be incorporated in Ireland, even though the far larger acquirer was based in Parsippany, N.J. The reason? By escaping American shores, Actavis expects to reduce its effective tax rate from about 28 percent to 17 percent, a potential savings of tens of millions of dollars per year for the company and a still larger hit to the United States Treasury. …Eaton Corporation, a diversified power management company based for nearly a century in Cleveland, also became an “Irish company” when it acquired Cooper Industries last year. …That’s just not fair at a time of soaring corporate profits and stagnant family incomes. …President Obama has made constructive proposals to reduce the incentive to move jobs overseas by imposing a minimum tax on foreign earnings and delaying certain tax deductions related to overseas investment.
But Mr. Rattner apparently is unaware that American firms that compete in other nations also pay taxes in other nations.
Too bad he didn’t bother with some basic research. He would have discovered some new Tax Foundation research by Kyle Pomerleau, which explains that these firms already are heavily taxed on their foreign-source income.
…the amount U.S. multinational firms pay in taxes on their foreign income has become a common topic for the press and among politicians. Some of the more sensational press stories and claims by politicians lead people to believe that U.S. companies pay little or nothing in taxes on their foreign earnings. Last year, even the president suggested the U.S. needs a “minimum tax” on corporate foreign earnings to prevent tax avoidance. Unfortunately, such claims are either based upon a misunderstanding of how U.S. international tax rules work or are simply careless portrayals of the way in which U.S. companies pay taxes on their foreign profits. …According to the most recent IRS data for 2009, U.S. companies paid more than $104 billion in income taxes to foreign governments on foreign taxable income of $416 billion. As Table 1 indicates, companies paid an average effective tax rate of 25 percent on that income.
Unfortunately, the New York Times either is short of fact checkers or has very sloppy editors. Here are some other egregious errors.
- Asserting that government schools are “starved of funding” when taxpayer subsidies actually have skyrocketed.
- Claiming that budget-cutting austerity nations are doing worse than “stimulus” nations, but getting the numbers backwards.
- Accidentally confirming that tax competition is needed to control the greed of the political class.
- Writing that the sequester will mean “deep automatic spending cuts” when the budget actually will climb by $2.4 trillion.
- Claiming that Italy is more prosperous than the United States and that there is less poverty.
- Urging a tax-increase budget agreement based on a chart showing that the only successful budget deal was the one that cut taxes.
And none of this counts Paul Krugman’s mistakes, which are in a special category (see here, here, here, here, and here for a few examples).
*There is an important lesson to be learned when American companies redomicile overseas. Unfortunately, the New York Times wants to make a bad system even worse.
P.S. Rand Paul has a must-watch video on the issue of anti-Apple demagoguery.
