Bad Tax Policy: You Can Run . . .(COMMENTARY)

The Washington Times (Washington, DC), May 8, 2002 | Go to article overview

Bad Tax Policy: You Can Run . . .(COMMENTARY)


Byline: Daniel Mitchell, SPECIAL TO THE WASHINGTON TIMES

The worst Supreme Court decision of all time? One of the leading candidates has to be the infamous 1857 Dred Scott decision, in which the Supreme Court ruled that slaves did not gain freedom by escaping to nonslave states.

Instead, they were considered property and had to be returned to their "owners."

Some U.S. companies soon may be treated in a similar manner, thanks to legislation being touted by Sens. Max Baucus, Montana Democrat, and Charles Grassley, Iowa Republican.

It all starts with the Internal Revenue Code, which forces U.S.-based companies to pay an extra layer of tax on income earned in other countries.

In an effort to protect the interests of workers, shareholders and consumers, some of these companies are escaping bad U.S. tax law by rechartering in Bermuda.

This is a win-win situation for America. We get to keep factories and headquarters in America, and our companies remain on a level playing field with businesses based in Europe and elsewhere.

Not so fast, Sens. Baucus and Grassley are saying. They want to stop "corporate expatriations," even though they keep American jobs in America and help U.S. companies compete with their counterparts in Europe and Asia.

Their legislation would forbid U.S. companies from re-chartering in countries with better tax laws.

The politicians who support this are acting as if these companies belonged to the government. Yet when House Minority Leader Richard Gephardt, Missouri Democrat, for instance, accuses them of being "unpatriotic," he never explains what's so patriotic about higher taxes and noncompetitive tax policy.

Republicans are doing their share of business-bashing, too. Mr. Grassley claims that corporate expatriations are "immoral," as if companies would be moral if they instead kept their U.S. charters and fired some of their workers.

If politicians are upset that some companies want to recharter, they should blame themselves for trying to tax "worldwide" income. An American firm competing against a Dutch firm for a contract in Ireland, for instance, must pay a 35 percent tax on its income - and the lion's share goes to the IRS.

The Dutch firm, by contrast, pays only the 10 percent Irish tax on its Irish-source income because the Netherlands doesn't tax income earned outside its borders. …

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Bad Tax Policy: You Can Run . . .(COMMENTARY)
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