The Wrong Approach to Multinational Taxation

Obama wants to raise taxes on U.S.-based multinationals. I think that if he wants to create jobs, he’s making a big mistake. Take a look here.

….to the degree that the new proposals bite, U.S.-based multinationals will find themselves at a bigger tax disadvantage compared with multinationals based outside the U.S. that operate under a different set of tax rules. In essence, the Obama proposal is a tax increase on companies headquartered in the U.S. The end result could well be fewer good jobs in the U.S.

Here’s a radical idea: Obama should go the other direction, striking a blow for simplicity and jobs by reducing the corporate income tax rate from its current 35% to 25%. This is a move that has been advocated by many economists and politicians, notably Senator John McCain (R-Ariz.) last year in his Presidential campaign. But just as only a staunch Republican such as Richard M. Nixon could have opened up relations with China, a reduction in the corporate income tax may be a maneuver that can be accomplished only by a Democrat.

In exchange for the tax break, he should get corporations to make public a summary of their tax returns. Openness and transparency is essential.

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