'Tax Dodge' Myths

Further to our post of last week about the President's plan to repeal a tax provision that creates jobs here at home, here's a great "Myth vs. Fact" op-ed in today's WaPo by Bob Samuelson, who pretty much punctures all the myths around this issue being a "tax dodge." As Samuelson correctly observes, "Most countries don't tax the foreign profits of their multinational firms at all." As for the myth that somehow this will stop jobs from being "exported,' he observes, "most overseas investments by U.S. multinationals serve local markets. Only 10 percent of their foreign output is exported back to the United States, says Harvard economist Fritz Foley."

In conclusion, he notes,

But many experts believe his proposals would actually destroy U.S. jobs. Being more heavily taxed, American multinational firms would have more trouble competing with European and Asian rivals. Some U.S. foreign operations might be sold to tax-advantaged foreign firms. Either way, supporting operations in the United States would suffer. "You lose some of those good management and professional jobs in places like Chicago and New York," says Gary Hufbauer of the Peterson Institute.

As this debate unfolds, policy makers would do well to heed the facts here and resist the rhetoric -- a difficult course to steer in this town.