Obama’s New Business Tax Scheme

President Obama is set to unveil a plan to crack down on cabinet members corporations that, in his view, are avoiding paying their share in taxes.  Basically the plan is to collect more tax revenue from corporations that do business overseas.  But Obama has apparently not considered the unintended consequences on this policy.

Consider the examples his administration fed the press like:

First up: Companies won’t be able to write-off domestic expenses for generating profits abroad. For instance, administrative tasks performed in New York for a London office would not be tax deductible in the United States.

What would be the effect of this policy?  Maybe the hypothetical pays more in US taxes, or maybe they close down the New York office.  

Or take this comparison:

Administration officials depicted the move as a way to close unfair tax loopholes that encouraged companies to send jobs overseas. They argued that if it costs the same amount to do business in, say, Ireland as in Iowa, why not do it entirely in Des Moines?

I don’t know if the administration intended it this way, but the comparison of Ireland to Iowa is unique in the Ireland has the lowest corporate tax rate in the industrialized world, and Iowa has the highest corporate tax rate in the world. Is it really “loopholes” than encourage companies to do business overseas, or high U.S. tax rates. 

Here’s an idea – instead of trying to punish companies who seek lower taxes, let’s cut corporate tax rates and encourage companies to stay here and stop “Out-forcing” jobs.