Increasing Taxes on U.S. Multinationals

The president’s budget proposal includes a new $122.2 billion tax on the foreign operations of American companies. I thought they wanted to create jobs. From the WSJ:

Deep in the president’s budget released Monday—in Table S-8 on page 161—appear a set of proposals headed “Reform U.S. International Tax System.” If these proposals are enacted, U.S.-based multinational firms will face $122.2 billion in tax increases over the next decade. This is a natural follow-up to President Obama’s sweeping plan announced last May entitled “Leveling the Playing Field: Curbing Tax Havens and Removing Tax Incentives for Shifting Jobs Overseas.”

The fundamental assumption behind these proposals is that U.S. multinationals expand abroad only to “export” jobs out of the country. Thus, taxing their foreign operations more would boost tax revenues here and create desperately needed U.S. jobs.

This is simply wrong. These tax increases would not create American jobs, they would destroy them.

Making it harder for U.S. multinationals to create U.S. jobs would be bad policy at any time. But it would be especially detrimental now because of how dramatically the private sector of the U.S. economy has contracted in the face of this recession.

Since the slowdown began in December 2007, private-sector payrolls have fallen precipitously. Today there are 2.4 million fewer private-sector jobs than 10 years ago. Moreover, in all four quarters of 2009, gross private-sector investment fell so low that it did not even cover depreciation. For the first time since at least 1947, the U.S. private capital stock shrank throughout an entire year.

The major policy challenge facing the U.S. today is not just to create jobs, but to create high-paying private-sector jobs linked to investment and trade.

Which firms can create these jobs? U.S.-based multinationals. They—along with similarly performing U.S. affiliates of foreign-based multinationals—have long been among the strongest companies in the U.S. economy.

See the whole piece here.