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May 11, 2009
Obama’s Intimidation Tax
Eight hundred more IRS
agents, closing tax loopholes used by U.S. companies that make money in
other countries, and calling businesses “tax cheats” for using the
messed up tax code as it is written, is going to inspire lots of
multinational companies to create more jobs here in the USA.
This plan, announced by
the president and model tax patriot and Treasury Secretary Tim Geithner,
will do just the opposite. And that $210 billion they expect to recoup
over 10 years will be long forgotten when the money does not
Economist Dan Mitchell
of the Cato Institute described the proposal this way while appearing on
the Fox News Channel:
“This is a
spectacularly misguided proposal,” Mitchell said. “In a global economy,
you don’t saddle your companies with extra costs. No other country in
the world does this kind of crazy policy.”
“What Obama’s proposal
would do is it would make the double taxation they pay to the IRS even
worse,” Mitchell said. “The Germans don’t do that, the Canadians don’t
do that. Even the French, who love taxes, don’t do this kind of crazy
policy. We are literally shooting our companies in the foot while other
countries are making it easier for their companies to compete around the
Liberals who believe in
more heavy-handed big government will not like Mitchell’s assessment,
but he is absolutely right.
Now here is an old and
non-original idea the administration could have used to generate more
revenue much faster. Reduce the tax on foreign profits to zero. This
would generate approximately $200 billion dollars a year
instead of a questionable $21 billion annually.
It worked in 2003, when
the tax on repatriated profits was reduced to about 5 percent and
generated more than $350 billion in two years. Maybe this was not a
consideration because it worked when George W. Bush was president with a
administration would not have to hire an additional 800 IRS agents to
browbeat more companies who have tried to comply with the laws in the
first place. The president’s announced plan is just one more example of
using the “bully” in “bully pulpit” to try to intimidate businesses.
Another example was
when a bank,
TCF in the Twin Cities, wanted to return a TARP loan that it did not
want in the first place. The Obama Administration would not accept the
repayment under the agreement terms, without the bank making an
Or how about the White
House threatening to “unleash the full force of the White House press
corps” to destroy someone’s reputation if they did not go along with
concessions being demanded during the Chrysler bankruptcy negotiations.
businesses will backfire. It might cause a business to take it on the
chin once in order to get on with their life, but it will also cause a
lot of businesses to move their operations out of the United States
Incentives in a free
market system always work better than intimidation. So far in the Obama
Administration, we have seen very little incentives for businesses and a
whole lot of intimidation.
As the late Jack Kemp
would say, “If you want less of something then tax it. And if you want
more of something, then un-tax it.”
U.S. businesses have to
compete globally with the second-highest corporate tax rate in the
world, a dysfunctional tax code and now a new “intimidation tax”.
There will certainly be
a lot less tax revenue, and a lot more resentment.
© 2009 North Star
Writers Group. May not be republished without permission.
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