Forget About Romney’s Taxes. Focus instead on how he would reward companies to ship jobs overseas and dodge U.S. taxes.
There has been precious little discussion in the media on one of the most dangerous and devastating features of the Romney-Ryan tax plan: the complete elimination of taxes on the overseas operations of U.S. corporations.
The Romney home page calls for the nation to “switch to a territorial tax system,” which translates into an end to taxation of the profits piled up offshore by American-based corporations. This radical step would create huge incentives to ship U.S. jobs overseas, where they would never face U.S. taxes, and to manipulate corporate earnings reports to claim that profits generated in the U.S. were actually produced offshore.
How much worse can things get? The U.S. recently finished a decade (2000-10) where it witnessed major U.S. corporations vaporizing 2.9 million jobs in America while displaying their prowess as conservative-deified “job creators” outside the U.S., where they chose to set up 2.4 million new jobs, according to the Wall St. Journal (4/19/11). Since the era of “free trade” was inaugurated with NAFTA being rammed through Congress by Bill Clinton, Al Gore, and Rahm Emanuel, the U.S. has lost 4.9 million manufacturing jobs. Some 60,000 U.S. factories have shut down. The impact of “free trade” is particularly visible in the ghostly, empty factories scarring the landscape across Ryan’s home district in southeastern Wisconsin.
Yet the new Romney-Ryan tax plan based on “territoriality” would turbo-charge the exit of more family-sustaining jobs.
Corporate America already benefits from a global plantation where nations like Mexico, China, Bangladesh and many others repress workers’ rights and drive down wages for the jobs remaining in America.
Tax expert David Cay Johnston, Reuters correspondent and author of the just-published Fine Print: How Big Companies Use ‘Plain English’ to Rob Us Blind, warns, “The Romney-Ryan plan would insure that any profits created offshore by U.S. corporations would never be taxed by the U.S. government. This would create a tremendous incentive to move more and more U.S. jobs overseas to escape taxes on the profits that foreign workers produce for them.”
The shift to “territoriality” would also unleash an even higher level of corporate manipulation of the tax system than prevails now, where as many costs as possible are ascribed to U.S. operations and the profits credited to their foreign subsidiaries. Major multinational corporations like Apple and GE and Nike use a variety of accounting tricks—especially, setting up hundreds of shell corporations--to essentially launder their profits before moving their lightly taxed money home.
The imposition of a “territorial” tax system exempting U.S. firms’ foreign operations thus would make the current system infinitely worse, both in terms of job loss and shrinkage of taxes paid by major corporations.
“If all you do is impose territoriality, the big multinationals will load up on interest in the U.S. and move the profits that they claim overseas,” explained Johnson. “If we had territoriality in our tax system, it would further advantage the multinational corporations at the expense of corporations that just operate domestically.”