In January my colleague Clay Waters noted how New York Times economics reporter Eduardo Porter called for Americans to pony up more in taxes in a piece headlined, "A Tax Bite Tailored To Help All [1]." Porter was back at it again Wednesday in a Business Day section front-pager headlined, "The Trouble With Taxing Corporations." [2]
"We have a tax problem; we are not collecting enough tax revenue -- period," Porter approvingly quoted the University of Michigan's Jim Hines, who whined, "we are never going to finance what we need with corporate taxes." Picking up on this thread, Porter lamented that the United States is "the only advanced nation that does not have a value-added tax, which is similar to a sales tax and can raise lots of revenue." Apparently the $2.5 trillion raised in federal revenue each year just can't cut it, according to Porter and Hines.
That the government has a spending problem rather than a money-raising
problem is not a perspective, however, that you'll find anywhere in
Porter's 33-paragraph story. The Times writer takes it on faith that
Uncle Sam desperately needs more cash and that greedy corporations
exploiting a complicated tax code are the problem.
So why not just simplify the tax code to make compliance less of a hassle than clever accounting? Why not make the corporate tax code globally competitive so as to encourage companies to incorporate and onshore themselves on American soil? Porter ignores these considerations and grouses instead about the near impossibility of a liberal pipe dream of harmonizing tax policy around the globe through international agreements.
Yes, rather than make the U.S. tax code more globally competitive for capital formation and with it revenue generation, he's instead obsessed with eliminating tax competition by making everyone play by the same rules.
Another deficiency in Porter's piece is how he completely omits that, and we'll use his language against him, the United States is among the few "advanced nation[s]" that actually taxes profits made by domestic corportions in overseas markets.
Instead, Porter fixates on the fact that the "Internal Revenue Service collects corporate taxes only on foreign profits repatriated into the United States, a slim slice indeed."
Yes, indeed, but the slice is slim because corporations would be daft in the head to regularly repatriate money and pay a 35 percent tax on it when they can move it around overseas accounts in ways that avoid a huge tax bite which harms their shareholders. Indeed, the repatriation tax penalty is a huge reason why Apple, Inc., borrowed money to finance a stock buyback [3] rather than tap into its stash of overseas cash for the project.
Repeal the law that applies a domestic tax rate on profits made nowhere on American soil, and corporations would be much more likely to repatriate overseas cash, and that cash, in the pockets of American investors, would eventually work its way into federal and state tax coffers.
"[M]aybe corporate taxes should just be kissed goodbye," an exasperated Porter conceded at the close of his article.
Now if only Mr. Porter and the Times at-large can kiss goodbye to their obsession with soaking Americans with more taxes, we might have a more productive national discussion on tax reform.
-- Ken Shepherd