Sunday, January 27, 2008

economics 102

This is a very interesting proposal for a solution to the problem of job exports from a tax analyst.

I am one of the people who decides to locate jobs outside of the U.S. Specifically, I am the head of tax for a U.S. multinational. It is my job to advise that high value manufacturing and research should, from a tax point of view, be located outside of this country. I advise that it is better to invest cash in foreign operations than in American ones. If the recent tax proposal of House Ways and Means Committee Chairman Rangel becomes law, I will advise that good administrative jobs should be moved out of the U.S. I don’t like giving that advice, but under current law that’s what the numbers dictate. I want to change that.
The proposal is tax neutral in its entirety:

But there is a simple solution that works. Give corporations a deduction for dividends they pay, and make up the tax revenue by getting rid of special rates for capital gains and by imposing a 7½% tax on individual income over $500,000 a year, which is all it takes to be revenue neutral. That would make the U.S. the best location in the world for high value operations. It would restore our economy and give middle class workers market power.
Interestingly, this is a truly bipartisan proposal. Both parties would have to give on doctrinal hobby horses. The Democrats would have to give on capital gains taxes, the Republicans have to give on tax preference for the wealthy, specifically a new high income tax bracket and regarding the exchange at death from parent to child as a taxable event.

It's interesting and somebody put a lot of sincere thought into the proposal, but until the Republican party leadership actually recognizes that bipartisanship means actually giving something or giving something up, it isn't going to happen. At this point, an examination of the record tells us that Republican bipartisanship is code for "You give us what we want and we won't accuse you of being soft on terror....(fingers crossed under the table: until the election)"

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