Treasury Sec. Jack Lew announces executive action to prevent companies moving HQ overseas to escape world's highest corporate taxes
In good news for every foreign company that competes with US corporations -- from Airbus to Toyota -- Treasury Secretary Jack Lew announced “the agency would change several tax rules to stop companies from buying smaller, foreign firms and then moving out of the U.S.” Because US corporations pay a corporate income tax rate of 35%, the world’s highest, they are less able to compete with foreign companies, which menas less income for Americans who work at their US operations when investment must be curtailed due to the lower rate of return after taxes. This means less product development, fewer new facilities, and other investments that would employ Americans (who would then pay personal income taxes to the feds).
Andrew Malcolm of Investor’s Business Daily offers some insightful observations:
The new regulations, which take effect immediately and may be followed by others that are retroactive, have all the earmarks of a classic Barack Obama initiative: They're late. They mean much less than they appear (think sanctions on Russia and Iran). They pit a faceless group of alleged wrongdoers against the middle class being defended by guess-who in the White House.
The entire problem is the fault of Congress, which happens to be out of session now. It suddenly requires urgent unilateral executive action by guess-who in the White House, who hasn't done anything significant either about corporate tax reform during any of his 2,072 days in office.
And it changes the discussion subject for a new week's news cycles from the latest uncomfortable Obama subjects -- confirmation that the Democrat rejected his entire national security team's advice in not arming Syrian rebels years ago and outspoken indications that current military leaders see through Obama's false promise of no U.S. combat forces in the fight against ISIS.
This is an about-face for Lew:
Previously Lew, another ex-Obama chief of staff, had said that only Congress could change the tax rules. But in a meeting with Obama last summer, Lew got second thoughts, saying he'd examine what could be done by executive action. Wouldn't you know, he came up with some.
In an ideal world, the federal government would end the corporate income tax. It is the equivalent of a seed corn tax, hobbling production that would increase personal incomes. But of course such a move would be easily demagogued as pandering to the rich, even though the income they receive as a result would be taxed.
The real victims of the corporate income tax are the people who are unemployed because investments are not made and jobs are not created. But they are invisible victims.
So, as a result of Treasury’s executive actions, American companies will lose out to foreign competitors, and jobs will be created in Shanghai, Toronto, Dortmund, and Toyota City, instead of Everytown, USA.