Well, as with most anything that comes from politicians, this claim is not what it seems. The first clue should be that the exact phrase, "tax breaks for companies that ship jobs overseas" is used over and over again in ads, debates and by the usual political hacks. This is a sure sign that the Democrats have issued a talking point...believing that they can count on the ignorance of the voters to believe their populist drivel.
But there must be something to this claim, right? Well, there is a tax break that these claims are based on, but we must understand the background of the issue before we can judge where the villainy lies. According to an article by William Melick, professor of economics at Kenyon College:
Part of the problem is that taxes are just too high: the U.S. has the second-highest corporate tax rate in the developed world. And soon we will be number one in a race nobody should want to win, as Japan reduces its corporate tax rate. In the past twenty years every single country in the developed world reduced its corporate tax rate. But not the United States - it actually increased its tax rate. The effective U.S. corporate tax rate is just below 40 percent, while the average of the other developed countries is now well below 30 percent.
Corporations are formed to create profit for their owners, whether private or public stock holders. These profits provide incentive for the owners to produce products or provide service. Profit also attracts investors and allows a corporation to reinvest in their business to expand and develop new products. A very important side-benefit of corporations pursuing profit is the jobs and benefits provided to their employees.
For corporations to be healthy and growing entities, they must attempt to maximize profit while remaining competitive in their markets. To do this, they must control their production costs. Taxes are a cost of producing products. To control this cost, corporations are often willing to spend millions of dollars to move from one State to another. This is a major reason that States like California, Pennsylvania and other high tax states have lost many businesses to other, low tax states.
In today's global economy, companies must also compete in the world market. As if to add insult to injury, U.S. tax code, unlike all other developed countries in the world, requires corporations to pay taxes on profits made overseas. Melick gives an example:
The high U.S. corporate tax handicaps our firms when they compete. When Goodyear, based in Akron, sells tires in South Korea, it pays taxes to South Korea at its 20 percent rate and more taxes to the United States. Every other country has changed its corporate tax laws to encourage domestic companies to compete in foreign markets. The result: their firms pay only the 20 percent rate to South Korea.
The evil tax break that the Democrats are trying to make so much political hay from is simply a compromise acknowledgment that something has to be done to help U.S. corporations maintain some level of global competitiveness. Instead of removing the double taxation on foreign profit, like all other countries, Congress at least provided a deferment. This "break" allows companies to delay paying taxes on foreign profit until they bring that profit back into the U.S.
The deferment has been painted by the Democrats as an incentive for corporations to export jobs...I see it more as an incentive to keep these corporations from relocating their headquarters to countries who treat them better. If Goodyear moved their headquarters to South Korea, along with the THOUSANDS of jobs that entails, they could still sell tires in the U.S. market...but would only pay taxes once for this "privilege." As the disparity becomes larger between countries, this will be a more attractive option.
So with this uncompetitive tax structure and the devalued dollar that makes profit in U.S. dollars worth less and less, the Democrats want to squeeze the evil corporations more so they can continue their own unprecedented spending spree. They also want to place a higher regulatory burden on companies. The results of their incompetent, totalitarian policies is the unemployment rates, corporate failures and wrecked economy we have today.
So, who are the villains, the ones who have attempted to provide some relief from the burdensome double taxation imposed on U.S. based companies competing overseas, or the power-hungry bureaucrats who never met a tax they didn't like? Through years of social training, in government run schools and through government-influenced media, many American have come to believe that corporations are evil and it is only your government who truly care for you and look out for your best interest. We have come so far from our founding principles that people think higher taxes are a good thing...while the founding generation went to war against this very thing.
No, it is not those who are trying to lower taxes to maintain world competitiveness who are the villains. They have actually not gone nearly far enough. It is not the corporations, without whom most of us would not have jobs. The villains are the tax and spend ruling class who wish to control every aspect of our economy through their onerous tax codes. These, big government oligarchs care only for their own power. It is they who need to be kept in check and guarded against.
So next time you hear one of those ads, just remember who it is that produces wealth in this country, and who it is who tries to steal that wealth away.
