Kerry Plan Eliminates Overseas Tax Breaks

[Thrill]

http://story.news.yahoo.com/news?tmpl=story&u=/ap/20040326/ap_on_el_pr/kerry_economy&cid=694&ncid=1963&sid=96378798

[Bill Todd]

1. What's wrong with this picture?

So under the new plan, profits from off-shore subsidiaries will be taxed as they occur, rather than only when brought back into the U.S. And this will supposedly create 10,000,000 jobs here in 4 years, and at the same time generate $12 billion in additional annual tax revenue.

Why does this sound much more like Bush's rosy fiscal projections than something that would come out of, say, the CBO? Why do I suspect that if it actually did generate all those jobs, it would be because it caused companies to create jobs here to replace jobs overseas, in which case the $12 billion in additional tax revenue would then drop to something far less impressive? Am I just being too skeptical here?

But even if I suspend my disbelief in both areas, I'm then struck by the use to which this $12 billion will be put: not to social programs, not to deficit reduction, not to low-income tax relief - but to reducing the normal corporate tax rate by 5%.

Corporate tax relief? Don't I remember (bear with me here: I'm pulling these numbers out of a dim recollection of something I read a while ago somewhere I can't remember...) that corporations contribute a lower proportion of our national tax revenue today than in many decades - something like 10% now, vs. 30+% in the '60s? I'm not inherently anti-corporate, though I do have some problems with an increasing amount of the corporate conduct that we've seen over the past decade or so, but it doesn't seem to me that further reductions in already significantly reduced corporate taxation should be at the top of the list of uses to which any additional cash should be put.

It sounds as if Kerry has gotten the message that jobs are a real issue. However, it's not clear why this change in taxation should actually affect job-creation to anything like the degree which he claims. And it's also not clear why it should produce both such vigorous job-creation and major additional on-going tax revenue. And why any such (potentially decreasing) additional revenue should be devoted to a general reduction in the corporate tax rate simply defies explanation.

All you Kerry enthusiasts, help me out here. I really do support elimination of overt incentives to out-source and therefore would support the proposal to stop deferring taxation on off-shore profits - but the rest just doesn't make much sense to me, especially the part where the putative additional (and possibly declining) revenue is converted into a permananet corporate tax break.

- bill

[sandnsea]

2. S Corporations?

That's one thing that comes to mind, that it would help SCorps across the board and that would probably do as much to stimulate the economy as targeted tax cuts would. But I really don't know, the speech isn't until Friday.