Obama’s New Plan: Bring Our Money Home?
by Byrne Hobart
Barack Obama has an exciting new plan to raise revenue: make companies pay taxes on the money they earn. Okay, so it’s not new, and it’s not that exciting. But it is a little more complicated than that.
Basically, the current plan is designed to tax income earned overseas, whether or not it’s returned to the US. Right now, if Apple sells an iPod in Italy, they pay Italian taxes on their Italian income. As long as they keep the money in Italy, they don’t have to pay US income taxes on it.
- The case for the plan is that it closes a giant loophole in the current tax scheme. And it’s not as if companies will just stop selling overseas if they have to pay regular taxes on the money. If a sale is only worth making because of special tax advantages, it’s probably a good thing to get rid of the tax issue.
- The case against it is that this is an extra tax on our best companies, and that it unfairly penalizes American workers. Consider someone who took a risk and joined Apple ten years ago, when their survival was in doubt. Now, they’re part of a company that is worth over $100 billion, mostly due to products that didn’t exist ten years ago. These products were mostly designed in the US, but are often sold overseas — so the risk-taking engineer is penalized for being part of a company that sells American-designed goods worldwide. And in a crowning irony, that tax revenue partially pays for bailing out American car companies, who can’t make something people outside the US want to own.
It’s easy to score political points by condemning companies for paying less in taxes than they could. But of all the unfair tax loopholes to close, this is one of the worst. Closing it punishes companies that can successfully compete overseas, and encourages American companies to cater to local, rather than global, taste. But when 25% of technology companies are founded by immigrants, and this bill hits technology companies especially hard, we have to wonder: if this law passes, will people still start companies in the US? Or will they stay home and sell to us instead?