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Originally posted by apechild
So Kerry thinks that putting US firms at a financial disadvantage when competing overseas will help the US economy?
Interesting...
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No.
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Current tax laws allow American companies to defer paying taxes on income earned by their foreign subsidiaries until they bring it back to the United States. If they keep the money abroad, they avoid paying U.S. taxes entirely.
Kerry would require companies to pay taxes on their international income as they earn it rather than being allow to defer it. The new system would apply to profits earned in future years only, not retroactively.
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Kerry's plan would eliminate an incentive for American companies to move more and more of their operations overseas, since they can use a tax loophole to avoid paying any tax on the revenue generated overseas.
In other words, currently American multinationals pay no tax on any foreign income that they can offset with foreign expenses. This gives them an incentive to make foreign expenses as high as possible, meaning move jobs and factories overseas, so that they can offset foreign revenue with the foreign expense.
Kerry's plan would eliminate this loophole, forcing american companies to pay tax on all corporate revenue.
I agree with onetime2's point that the elimination of the loophole won't help much, but should the federal government be providing companies with a tax incentive to move their operations offshore? I don't think so.