https://www.washingtonpost.com/business/economy/trump-promised-america-first-would-keep-jobs-here-but-the-tax-plan-might-not/2017/12/15/7b8ed60
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On the Friday before Thanksgiving, Kenny Johnson left the Nelson Global Products plant in Clinton, Tenn., for the last time. Having devoted nearly 13 years to making tractor-trailer exhaust pipes, Johnson, 41, spent some of his final weeks at the plant watching Mexican workers train to take his job.
“They brought three or four groups at different times,” he said. “To learn the jobs that are going to Mexico.”
This was the kind of economic dislocation that President Trump vowed to prevent with his “America First” policies. Over the past year, he threatened to impose a new tax on companies eyeing offshore locales and repeatedly proclaimed the imminent return of millions of lost American jobs from overseas.
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What happened to the workers in Clinton, tax experts say, will probably happen to more Americans if the Republican tax overhaul becomes law. The legislation fails to eliminate long-standing incentives for companies to move overseas and, in some cases, may even increase them, they say.
“This bill is potentially more dangerous than our current system,” said Stephen Shay, a senior lecturer at Harvard Law School and former Treasury Department international tax expert in the Obama administration. “It creates a real incentive to shift real activity offshore.”
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“The overall effects of this are going to be unambiguously bad for the workers that it’s ostensibly designed to help,” Clausing said.
There are three reasons, according to nonpartisan tax experts. First, a corporation would pay that global minimum tax only on profit above a “routine” rate of return on the tangible assets — such as factories — it has overseas. So the more equipment a corporation has in other countries, the more tax-free income it can earn. The legislation thus offers corporations “a perverse incentive” to shift assembly lines abroad, said Steve Rosenthal of the Tax Policy Center.
Second, the bill sets the “routine” return at 10 percent — far more generous than would typically be the case. Such allowances are normally fixed a couple of percentage points above risk-free Treasury yields, which are currently around 2.4 percent.
As a result, a U.S. corporation that builds a $100 million plant in another country and makes a foreign profit of $20 million would pay roughly $1 million in tax versus $4 million on the same profit if earned in the United States, said Rosenthal, who has been a tax lawyer for 25 years and drafted tax legislation as a staffer for the Joint Committee on Taxation.
Finally, the minimum levy would be calculated on a global average rather than for individual countries where a corporation operates. So a U.S. multinational could lower its tax bill by shifting profit from U.S. locations to tax havens such as the Cayman Islands.
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