Ecouraging Companies to Stay By Raising Corporate Taxes

On Monday President Obama said that he was going to crack down on companies and individuals who abuse the overseas tax shelters. Good for him. The abuses he is referring to are already illegal but I'm all for enforcing the law. I'm a little leery about paying for the 800 new auditors in the IRS this is going to require, but enforcing the law is still a good thing.

However, and this is a really big however, in addition to enforcing those laws he's also going to increase corporate taxes. He talked about taxing corporations on the money they make overseas and aren't currently paying taxes on. He made this sound like it was criminal and that they were avoiding paying taxes, but the truth is that they are paying taxes in the other country and paying the taxes here too would be double taxing. And we are the ONLY country who would be doing that. So what he was really saying was that he intends to raise corporate taxes. Obama states that this would encourage companies to keep jobs here, but what about retail stores that have to have employees in stores overseas in order to sell their products? What about companies that need to manufacture in a country in order to be competitive there due to high tariffs and import charges?

If you think this sounds perfectly reasonable, that if they're an American company then the money they make globally should be taxed here, let's put it in perspective of individuals instead of companies. Sales tax is based on where you buy the product not where you live, and sales tax is deferred if the product is shipped elsewhere. But what if this wasn't the case? And what if in addition to paying the sales tax for the area where you bought it or where it was manufactured, you also had to pay the sales tax for where you live? This is the basic principle of Obama's corporate tax plan.

I recently went on vacation to Florida and did quite a bit of shopping while I was there. I paid only the FL sales tax and not the MO sales tax. If we applied Obama's corporate tax plan to me, then I would have paid both sales taxes on everything I purchased there. So let's say that you buy something on-line from an area that has an 8% sales tax and the area you live in has a 6.5% sales tax. Under Obama's proposed plan it would be the equivalent of corporations paying 14.5% tax instead of 8%. And according to Obama, paying double taxes on the same profits is only paying their fair share.

We already have the second highest corporate tax rates in the world. And when the state taxes are added on to the federal, some of our states have the highest corporates taxes in the world. For example, our federal tax rate is 25% and Ireland's tax rate is 13%. Which would you rather pay? This, and labor costs, are the reasons that our corporations are moving overseas. But instead of decreasing our tax rate in order to be more competitive, the current administration is raising it.

Instead of encouraging companies to stay by offering a competitive tax rate, they punish corporations for wanting to sell their products in other countries through double taxation. Once again, where is Obama's touted fairness?