The Job Creating 'Loophole'

Lots of news coverage today of Obama's plan to raise $190 billion from business -- and ultimately its workers - by changing the existing tax laws. Funny how these things become "loopholes" or in the words of the WaPo headline, a "tax dodge."

See, there's this thing called the tax code. It prescribes certain rules of taxation. You can either pay as much tax as you can, or work within the rules to pay as little as you can. Think -- as an individual, would you not claim a charitable deduction? So the tax code is set up to allow groups to minimize their tax burden. Remember, the US's corporate tax burden is the second-highest in the world, not a  contest you want to win. Still, railing against big, bad corporations is good politics.

The WaPo editorial, however, taketh away what the headlines giveth on the front page. The editorial rightly notes our standing as the second-highest corporate taxer in the world, and goes on to say: 

"However, some of the changes the administration is contemplating could harm U.S. competitiveness. Higher tax burdens would put U.S. corporations at a disadvantage compared with foreign competitors that do not face the double tax regime to which some corporations would be subject. The administration cited numbers showing that in 2004, U.S. multinationals paid $16 billion in taxes on $700 billion in foreign earnings, but it did not mention the $120 billion in foreign taxes they paid that year. Trade groups will argue that the increased cost of doing business will lead to job losses in the United States, not the gains promised by Mr. Obama."

At the end of the day, this is a penalty for any company that's grown into a  global competitor, forcing them to pay more taxes than their international competitors. It also penalizes companies that have grown big enough -- and created enough jobs -- to become truly global. Way to grow the economy. The WaPo story notes that "key Democrats" have received this concept "coolly." Let's hope cooler heads prevail and that Republicans and Democrats alike come down on the side of global growth and jobs.