An excellent op-ed by Robert J. Samuelson appeared in The Washington Post yesterday about the ‘great tax dodge.’
President Barack Obama (D) and many others have been perennially frustrated by the concept of the multinational corporation. The issue, at least for many big-government types (but others too), is that these multinational corporations don’t pay all their taxes to their home country. Apple Computer, as an example, does not pay U.S. taxes on its foreign manufacturing plants, foreign employees, or foreign sales. Apple pays taxes for its presence and employment in each country according to that country’s laws, even though it is based in the United States.
To some, this presents an excellent opportunity. Let’s apply U.S. taxes to the spoils of U.S. companies for all their business endeavors, even those performed overseas. The problem is that if we do that, U.S. companies will stop operating overseas since the tax burden will become far too onerous. That sounds great for us, until one-by-one every other country starts doing the same thing in return . . . double-taxing their home-based companies and forcing them to give up on manufacturing in the United States. Eventually, the whole multinational system collapses, harming everybody.
Samuelson addresses all of this in his piece, detailing the function of the multinational economic system and concretely demonstrating its benefits for us, and pointing out that punitive taxation on multinational companies will undermine our economy (and the rest of the world’s economies), not help.