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Wednesday, May 6, 2009

Obama Tax Plan Will Not Create Jobs; Will Most Likely Destroy Jobs

Before anyone tries to dismiss this as some sort of right-wing propaganda, understand that this story comes from the leftist-leaning CNN.

In response to Obama's claims that his increase of taxes on multi-national corporations will somehow create new jobs, Jeanne Sahadi, a CNNMoney.com senior writer, has this:

Will it work? Tax policy experts and corporate lobbyists are dubious. They say that his proposals, if implemented, could raise revenue for the government but are not likely to spark an increase in U.S. jobs.

Among the changes Obama wants is to require U.S.-based multinationals to defer taking deductions on expenses related to their foreign operations until they bring back the profits to the United States and pay U.S. income tax on them.

The money that the Obama administration wants to tax away is the same money that these corporations use to create jobs. If the government confiscates that money, no jobs will be created and in many cases, currently existing jobs that were created with that money will be lost.


But U.S. tax policy is not the only factor a company weighs in deciding whether to invest beyond the borders.

For instance, companies go abroad primarily to sell products abroad, said Rosanne Altshuler, co-director of the Tax Policy Center. In 2006, she noted, only 10.5% of sales of U.S. controlled foreign subsidiaries were sent back to the United States.

"And there are a lot of advantages to having the production close to the place of final sale," Altshuler said. One is lower transportation costs.

Indeed, total manufacturing cost is the most compelling reason to move operations abroad, and countries actively woo companies with tax holidays and other incentives, said Sang Kim, a partner in international tax practice of the global law firm DLA Piper.

In other words, companies and corporations will always move to where they can get the best deal and maximize their profits. If Obama is allowed to go through with this tax increase, American corporations will simply move their operations somewhere outside of the United States where their profits can be realized without the government coming in and taking a large portion of them.

Read on:

"Even if all this passes, will it create factories in the United States? Absolutely not," Kim said.

Some say Obama's plan won't create jobs because tax policy has a limited influence on jobs.

"Employment is determined by overall demand for goods and services, not by targeted tax and spending provisions," Eric Toder, a fellow at the liberal Urban Institute and former assistant secretary of tax analysis for the Treasury Department, wrote in the Tax Policy Center's blog Tax Vox.

Exactly. Those factories will end up somewhere else and provide employment for some other coutry.

If I had a choice between a 30% corporate tax in the United States and a 12% corporate tax in Ireland, I'd be setting up shop in Ireland right now.

You can access the complete article on-line here:

Will Obama Tax Plan Really Save Jobs?
Jeanne Sahadi
May 6, 2009

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