Eric Toder of the Tax Policy Center weighed in on President Obama’s pledge to eliminate the ability of U.S. companies that reinvest their foreign profits in foreign subsidiaries to defer paying U.S. taxes on those profits until the money is brought back into the United States:
[D]oes deferral cost American jobs? The simple answer is no.
The number of jobs in the United States has almost nothing to do with any tax provision that affects selected investments or industries.
Employment is influenced by fiscal and monetary policies – as well as periodic shocks to the system such as financial market meltdowns – that determine whether American and foreign consumers and investors are willing to purchase enough American-made goods, services, and assets to keep U.S. workers fully employed.
Taxes can indirectly affect employment to the extent they affect overall wage levels, but this effect is likely quite small because labor supply is not very sensitive to wages.
Specific tax incentives do affect where Americans work and what they produce and also affect overall living standards by influencing how efficiently we use our scarce people and capital and how much we invest for the future. But they have scant impact on total employment.
Prediction: Based on the early reaction of tax bloggers and tax policy experts, I predict President Obama will revisit this issue and maybe even back off of it entirely.
The last thing we need now is the diminishment of American competitiveness abroad.
Related Posts:
Obama Vows to Close Foreign Loopholes: Corporations to Fight Back
2 responses so far ↓
1 Slate Magazine: An Argument Against Tax Haven Crackdown // May 7, 2009 at 8:09 am
[...] Does Deferral of Offshore Earnings Cost Americans Jobs? “No,” says Tax Policy Center Bookmark & Share: [...]
2 Microsoft to Move Jobs Overseas if Obama Changes Deferral Rules // Jun 9, 2009 at 8:26 am
[...] Does Deferral of Offshore Earnings Cost Americans Jobs? “No,” says Tax Policy Center Bookmark & Share: [...]
Leave a Comment