Kerry's plan to end overseas corporate tax breaks - Tilted Forum Project Discussion Community

onetime2 · 03-26-2004, 06:24 AM

http://story.news.yahoo.com/news?tmp...d=694&ncid=716

Quote:

Kerry Says He Will End Overseas Tax Breaks

By RON FOURNIER, AP Political Writer

WASHINGTON - John Kerry (news - web sites), promising to create 10 million jobs and keep them in America, said Friday he would cut corporate taxes by 5 percent and eliminate tax loopholes that push jobs overseas.

The Democratic presidential nominee-in-waiting said he would fight a reluctant Congress and special interests to carry out the most far-reaching changes in international corporate tax law in four decades. Kerry overrode the objections of some advisers who opposed the corporate tax cut on political grounds

"Time after time, (the Bush) administration has put ideology first and jobs last. Today, I'm announcing a new economic plan for America that will put jobs first," Kerry said in remarks prepared for delivery Friday at Wayne State University in Detroit.

The plan would face a series of obstacles should the Massachusetts senator defeat President Bush (news - web sites) in November, starting with politically powerful corporations that benefit from the overseas tax breaks he wants to scrap.

Kerry also may be second-guessed by Democrats who would prefer to transfer his plan's savings to more targeted jobs initiatives or programs that benefit middle-class voters.

But he settled on a blend of loophole-cutting populism and business-friendly moderation, casting his package as jobs-producing tax reform. Polls show jobs are the top issue with most voters, and Kerry is viewed as best suited to improve the economy. Terrorism is the No. 2 issue, and most voters say they trust Bush most to protect the nation.

Though the economy has shown signs of strengthening, more than 2.2 million jobs have been lost since Bush took office.

The centerpiece of Bush's economic plan is the across-the-board tax cuts he pushed through Congress, which the president believes will help businesses create jobs. Bush has warned voters that Kerry would raise taxes and recklessly spend their money.

"John Kerry's plan to reshuffle the corporate tax code does nothing to help America's small businesses and entrepreneurs be more competitive," Bush spokesman Steve Schmidt said.

The new initiative, which Kerry said will pay for itself, is part of his overall economic plan to lower the cost of health care and energy, increase investment in education and reduce the federal deficit. Kerry has not fleshed out the cost or other details of his overall spending, but the Bush campaign has made a series of assumptions to conclude he would need to raise taxes by at least $900 billion, a charge the Kerry campaign disputed.

Kerry unveiled the first plank of his economic package in Michigan, a politically important state where 6.6 percent of workers are unemployed. Many of the jobs moved abroad.

"We now have a tax code that has American taxpayers paying to ship jobs overseas," Kerry said. "That makes no sense. And if I am president, it will end."

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.

He also would allow companies to defer taxes when they located a business in a foreign country that serves that nation's markets. A U.S. company seeking the tax break could open a car factory in India to sell cars in India, for example, but could not relocate abroad to sell cars back to the United States or Canada.

Kerry's campaign estimates that the change would save $12 billion a year. The savings would be used to reduce the corporate tax rate from 35 percent to 33.25 percent — a 5 percent reduction.

More than 99 percent of companies paying corporate taxes would see their tax bills lowered, the campaign says. But the 1 percent paying higher taxes are some of the nation's biggest and most powerful.

"I know how tough their lobbying will be," Kerry said. "But I believe that's why we have elections in America — so that the people can set us on a new course."

Advisers inside and outside the campaign debated whether to use the $12 billion to cut corporate taxes or target it elsewhere. Some wanted a robust tax credit for employers who create jobs. Kerry opted for a scaled-down version of that initiative.

"The senator made a decision that he wanted this to be a pro-growth, pro-jobs tax reform," said Gene Sperling, a top economic adviser in the Clinton White House who helped Kerry fashion his package. "Instead of looking at this as a way to raise money for other priorities, he wanted this to be a tax reform that was closing loopholes and ending abuses."

Another senior Democratic official advising the Kerry campaign said the candidate missed an opportunity to court middle-class voters. The official spoke on condition of anonymity. Campaign spokeswoman Stephanie Cutter said Kerry has promised to extend Bush's middle-class tax cuts, and has other programs in mind for such voters.

Unfortunately, tax loop holes are not "pushing jobs overseas". The moderate tax cut proposed by this plan is minor in comparison to the labor cost savings in terms of health care and salaries which are the primary drivers of "job exports".

This program appears to be more fluff than substance.

Sparhawk · 03-26-2004, 11:17 AM

It looks like a smaller program in scope than Bush's reckless tax cuts - I also like the fact that it is offset with closing the tax deferral loophole. Kerry seems to be following in Clinton's shoes - mix of targeted tax raises and cuts - hopefully this strategy will carry him to the success Clinton had in '92.

onetime2 · 03-26-2004, 11:21 AM

Quote:

Originally posted by Sparhawk
It looks like a smaller program in scope than Bush's reckless tax cuts - I also like the fact that it is offset with closing the tax deferral loophole. Kerry seems to be following in Clinton's shoes - mix of targeted tax raises and cuts - hopefully this strategy will carry him to the success Clinton had in '92.

The problem is, there is no chance that it will achieve what he hopes. There are far more reasons for companies to hire employees outside the US than taxes.

Additionally, in this case, the tax cuts and raises are on virtually the same entities.

Halx · 03-26-2004, 11:32 AM

He stole that idea from me

onetime2 · 03-26-2004, 12:16 PM

Quote:

Originally posted by Halx
He stole that idea from me

That bastard!

Yakk · 03-26-2004, 12:59 PM

It is a pay-as-you-go tax cut.

Fiscal responsibility! OMG!

Will it prevent offshoring? Nope. But, a heavy hand on the economy is a bad idea. You influence the economy, you don't force it.

Sparhawk · 03-26-2004, 04:21 PM

Quote:

Originally posted by onetime2
The problem is, there is no chance that it will achieve what he hopes. There are far more reasons for companies to hire employees outside the US than taxes.

Additionally, in this case, the tax cuts and raises are on virtually the same entities.

It's a start, and the first of three speeches on the topic. It also strikes me as over-reaching to say "there is no chance," when, logically, there is - especially for corporations that are sending money overseas specifically because of that loophole and for no other reason (health care or labor costs, for example).

mml · 03-28-2004, 03:48 PM

Overall, I am pleased with the program. I do have some concerns about the U.S. being the only country to tax foreign profits, but the offset in reducing domestic taxes will help curb this. This is a complicated plan(as it should be) and I do not have a complete grasp on all of the details, but it gives us an idea about where Kerry would like to take this country. I do, however, believe that in a global economy, jobs will be exported, and others imported. We as a nation need to consider how we would like this inevitability(sp?) to occur.

onetime2 · 03-28-2004, 05:49 PM

Quote:

Originally posted by Sparhawk
It's a start, and the first of three speeches on the topic. It also strikes me as over-reaching to say "there is no chance," when, logically, there is - especially for corporations that are sending money overseas specifically because of that loophole and for no other reason (health care or labor costs, for example).

How many corporations do you believe are sending jobs overseas solely for US tax breaks? The number is miniscule and there is no possible way to stop offshoring by closing these "loopholes".

Sparhawk · 03-28-2004, 08:33 PM

Quote:

Originally posted by onetime2
How many corporations do you believe are sending jobs overseas solely for US tax breaks? The number is miniscule and there is no possible way to stop offshoring by closing these "loopholes".

You sound very confident, considering this plan has only been public for about 4 days... Do you have some data to back up your conclusions, or should I take you at your word?

onetime2 · 03-29-2004, 05:26 AM

Quote:

Originally posted by Sparhawk
You sound very confident, considering this plan has only been public for about 4 days... Do you have some data to back up your conclusions, or should I take you at your word?

I'm sure I could put something together but, in all truth, I don't have the drive to do it.

I look forward to seeing the details of how he will make the case for it though. I have never, in all my years of business (including taking part in decisions to source work from Japan and then China), heard a single company executive or strategic planner state "tax savings" as a reason to "outsource". The true picture of why jobs move, the cost savings associated with the moves, and the issues that most heavily weigh on why the jobs wouldn't move is far more complicated than any tax reform could influence.

orphen · 04-07-2004, 07:42 PM

blah Kerry's lack of plan for the future of our economy is kind of disturbing...
but then, he did go to the same high school as me..
i guess he's better than Bush... i talked to some old teacher in Andover and they said Bush was probably the last person you'd expect to be president...

apechild · 04-12-2004, 01:53 PM

So Kerry thinks that putting US firms at a financial disadvantage when competing overseas will help the US economy?

Interesting...

HarmlessRabbit · 04-12-2004, 02:12 PM

Quote:

Originally posted by apechild
So Kerry thinks that putting US firms at a financial disadvantage when competing overseas will help the US economy?

Interesting...

No.

Quote:

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.

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.

onetime2 · 04-13-2004, 04:30 AM

Quote:

Originally posted by HarmlessRabbit
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.

Ack! We agree, scary times I tell you.

I honestly do not have a problem with the closing of the loophole but I hate the fact that Kerry and many of his supporters are pointing to this as some big plan that will have a major impact. It won't.

I would prefer to see him point to real economic plans that will have an impact rather than these made up ones that only serve to play off peoples' fears (his upcoming misery index is another example).

apechild · 04-13-2004, 05:18 AM

Quote:

Originally posted by HarmlessRabbit
they can use a tax loophole to avoid paying any tax on the revenue generated overseas.

False. They must whatever taxes they are assessed by the country in which they operate.

Quote:

Originally posted by HarmlessRabbit 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.

This is absurd and completely untrue. No company with a profit motive will ever have any "incentive" to make expenses as high as possible. Reducing one's tax burden by eliminating profits isn't exactly sound financial strategy. The idea of shifting expenses overseas in order to reduce the overall tax burden doesn't make any sense either - you got it completely backwards. Remember, corporate tax rates in the US are much higher than they are in most other nations, so as it is right now, there's an incentive to concentrate profits overseas where they will be subject to a lower tax rate and shift expenses to the US to offset the higher American tax rate. If, as Kerry would have it, overseas profits are taxed first by the nation in which they are generated, and then by the US, the incentive to shift those expenses overseas would finally exist.

The Economist, in an article entitled Clever politics, lousy economics; John Kerry's corporate-tax plan [The Economist, April 3, 2004, p.12], concludes of the proposal: "it is unwise, likely to be counterproductive and seems to be meant mostly to mislead voters."

Tell me, do you support Kerry's plan on its economic merits, or have you been misled?

HarmlessRabbit · 04-13-2004, 09:22 AM

Quote:

Originally posted by apechild
This is absurd and completely untrue. No company with a profit motive will ever have any "incentive" to make expenses as high as possible.

You missed the word "foreign".

Quote:

The idea of shifting expenses overseas in order to reduce the overall tax burden doesn't make any sense either - you got it completely backwards. Remember, corporate tax rates in the US are much higher than they are in most other nations, so as it is right now, there's an incentive to concentrate profits overseas where they will be subject to a lower tax rate and shift expenses to the US to offset the higher American tax rate. If, as Kerry would have it, overseas profits are taxed first by the nation in which they are generated, and then by the US, the incentive to shift those expenses overseas would finally exist.

Bah, could you bluster a little more without doing the math. Most other countries have value-added tax, so you only pay tax on what you sell to a foreign consumer. So, let's do the math.

USA-based operational expense (say, a tech-support callcenter):
- Cost of making the product: $100
- Cost of callcenter per unit: $10
- USA tax rate on revenue (say 20%)
- USA tax: $20
- Foreign VAT: 10%
- Foreign VAT for selling the product $10

Gross profit: $100 - $20 - $10 - $10 = $60
(vastly oversimplified, I know)

Foreign-based operation expense (say, a tech-support callcenter):
- Cost of making the product: $100
- Cost of callcenter per unit: $10
- USA tax rate on revenue (say 20%)
- USA tax: $18 (only paying on $90 since the $10 is written off)
- Foreign VAT: 10%
- Foreign VAT for selling the product $10

Gross profit: $100 - $18 - $10 - $10 = $62

So, the more operations the company moves outside of the USA, the less tax they pay and the more they make. What's so hard to understand?

Quote:

Tell me, do you support Kerry's plan on its economic merits, or have you been misled?

Tell me, apechild, how long have you been beating your wife?

BigGov · 04-13-2004, 10:17 AM

The biggest factor is wages. Plain and simple.

Americans were able to get factory jobs and get paid a decent amount of money. Only problem is a "decent amount" in the USA is a fortune in other countries. The jobs have been basically "outbided". Why pay someone $50,000 a year when someone over here will do it for $5,000?

They ain't coming back. Well, basic economics says that. If some moron forces manufacturing jobs back into the USA there isn't going to be any good because of it.

apechild · 04-13-2004, 10:55 AM

Quote:

Originally posted by HarmlessRabbit
[B]USA-based operational expense (say, a tech-support callcenter):
- Cost of making the product: $100
- Cost of callcenter per unit: $10
- USA tax rate on revenue (say 20%)
- USA tax: $20
- Foreign VAT: 10%
- Foreign VAT for selling the product $10

Gross profit: $100 - $20 - $10 - $10 = $60
(vastly oversimplified, I know)

Foreign-based operation expense (say, a tech-support callcenter):
- Cost of making the product: $100
- Cost of callcenter per unit: $10
- USA tax rate on revenue (say 20%)
- USA tax: $18 (only paying on $90 since the $10 is written off)
- Foreign VAT: 10%
- Foreign VAT for selling the product $10

Gross profit: $100 - $18 - $10 - $10 = $62

What? "Gross Profit" equals "Cost of making the product" minus taxes? And taxes are assessed on revenues? And VATs are paid by the producers of the product? Um, your example is flawed, rabbit. Nice try though

Try it again, except this time define profit as revenue minus expenses, assume income taxes are imposed not upon revenues but on profits, and assume that VATs are paid by the consumer of the product. Got that?

Quote:

What's so hard to understand?

You tell me, genius.

Quote:

Tell me, apechild, how long have you been beating your wife?

WTF???

onetime2 · 04-13-2004, 11:00 AM

Alright, things are starting to get pretty personal in the exchanges in this thread. Can we take a step or two back and come at this from a different angle?

Lebell · 04-13-2004, 11:51 AM

Knock off the personal comments everyone.

HarmlessRabbit · 04-13-2004, 12:26 PM

Quote:

Originally posted by Lebell

Knock off the personal comments everyone.

Sorry, my comment was in good fun.

Quote:

What? "Gross Profit" equals "Cost of making the product" minus taxes? And taxes are assessed on revenues? And VATs are paid by the producers of the product? Um, your example is flawed, rabbit. Nice try though Try it again, except this time define profit as revenue minus expenses, assume income taxes are imposed not upon revenues but on profits, and assume that VATs are paid by the consumer of the product. Got that?

As I said, my model was simplified. Show me your math, I'm a simple kind of guy.

apechild · 04-13-2004, 01:13 PM

Fine, but let me first remind everyone that only profits, not revenues are taxed, and that profits are the result of revenues less expenses.

So a US firm (XYZ co) builds a semiconductor factory in Taiwan, and sells most of those semi-conductors back to US customers. The corporate income tax rate in Taiwan is 25%, whereas in the US it's 35%. Labor costs in Taiwan are lower than they are in the US, but additional administrative and legal expenses are incurred by operating in a foreign country, and additional shipping costs must also be incurred.

Under current law,
XYZ co takes in $100mm in revenues from the sale of these semiconductors back to the US market.
Labor costs are $35mm
Raw materials costs are $20mm
Overhead costs (depreciation of plant and equipment , electricity, etc.) run $5mm
Administrative expenses are $4mm
Shipping expenses are $1mm
Net income before taxes are (100-35-20-5-4-1)= $35mm
Less Taiwan corporate income taxes = 35 * .25 = $8.75
Leaves net income of 35 - 8.75 = $26.25mm

Under Kerry's proposal
all of the above remains the same except
$26.25mm less US corporate income taxes = 26.25 * .325 = $8.53
Leaves net income of 35 - 8.75 - 8.53 = $17.72mm

Meanwhile, Taiwan Semiconductor Co makes similar products and faces similar labor, materials, and administrative expenses, but is not subject to US income taxes. It uses its comparative advantage to lower prices to a level that squeezes XYZs margins dry. XYZ shuts down its facility, fires a bunch of employees, and buys pre-made components from Taiwan semiconductor, which, coincidentally, just bought a new prodcution facility at fire-sale prices and, absent any real competition, decides now is a good time to raise prices 20% across the board.

Ouch!

One last point I want to make is that kerry's pledge to "create" 10 million new jobs means that we will have to outsource more work. Why? As of March of this year, there were only 8.4 million unemployed persons in the US (source: Labor Department). That means we'll have to hire 1.6 million foreign workers to fill the rest of the jobs once our unemployment rate hits 0.0%

apechild · 04-13-2004, 01:21 PM

let me keep going with this.

The alternative scenario for XYZ - domestic production of semiconductors:

XYZ co takes in $100mm in revenues from the sale of its semiconductors back to the US market.
Labor costs are $85mm
Raw materials costs are $20mm
Overhead costs (depreciation of plant and equipment , electricity, etc.) run $5mm
Administrative expenses are $1mm
Shipping expenses are $0mm
Net income before taxes are (100-85-20-5-1)= $11mm net loss

In this alternative, Kerry's ostensible "incentive" to bring jobs back home fails miserably, because the prosperous US worker simply costs much more than the global market for semiconductors will sustain.

So in either case, XYZ co is the loser and Taiwan Semiconductor is the winner.

Now, a corporate tax policy that would actually help US businesses and encourage them to hire and expand would be to reduce US corporate taxes to a level more competitive with the rest of the world - somewhere in the mid 20% area. Just look at what Ireland has accomplished in the last few years since it cut its corporate income tax rate.

HarmlessRabbit · 04-13-2004, 01:58 PM

You're ignoring the fact that a double tax doesn't exist. The corporation isn't paying tax to both Taiwan and the USA. Here's how the WSJ lays it out:

Quote:

The tax code is written in a way that allows companies not to pay the full 35% U.S. corporate tax rate on foreign income when that money remains invested overseas.

Backing up a step, here's how it works before the loophole:
A company earns $100 million abroad in Lowtaxistan where the corporate tax rate is 20%. The foreign subsidiary pays that money to the U.S. parent. The parent then pays $35 million to the U.S. government and takes a credit for the 20% (or $20 million) payment to the Lowtaxistan government. So the net to the U.S. Internal Revenue Service is $15 million.

But here's how it works with the loophole: The U.S. subsidiary simply keeps the money offshore and certifies to its accountants that the money is invested overseas. It never remits the money to the parent and so never pays the
$15 million extra to Uncle Sam.

Do the math yourself. Which is better?

a) A factory in Lowell, Mass., that will generate $100 million in pre-tax profit that nets $65 million, or

b) A factory in Lowtaxistan that will generate $100 million in pretax profit that nets $80 million.

All things being equal, most people would pick "b." (And they aren't equal because Lowtaxistan has 750 gazillion people who will work for two gonzolees a day -- and the
gonzolee is fixed to the U.S. dollar at a rate of 8.65.)

These are called "unrepatriated earnings" and they are increasingly commonplace. Just go into Free Edgar (www.freeedgar.com4) or some other SEC search engine (I like 10K Wizard5) and plug in the term "unremitted earnings" or
"undistributed earnings" and search 10-K forms to see how many annual statements come up.

What you'll find is something like this from Pfizer.

"As of December 31, 2003, we have not made a U.S. tax provision on approximately $38 billion of unremitted earnings of our international subsidiaries. These earnings
are expected, for the most part, to be reinvested overseas.

It is not practical to compute the estimated deferred tax liability on these earnings."

apechild · 04-13-2004, 02:15 PM

Quote:

Originally posted by HarmlessRabbit
You're ignoring the fact that a double tax doesn't exist. The corporation isn't paying tax to both Taiwan and the USA.

You seem to have misinterpreted my words again.

Please re-read my example above, that begins with "under current law." In that example, which shows how things work under current law, there is no double tax. That is exactly the point I was trying to illustrate. The second example then shows what would happen under Kerry's proposal to create a double tax.

Lebell · 04-13-2004, 03:32 PM

Quote:

Originally posted by HarmlessRabbit
Sorry, my comment was in good fun.

I realize that may be the case at times, unfortunately people don't seem to have a sense of humor in "Politics".

Less chips-on-shoulders and more thick skins is my motto

HarmlessRabbit · 04-13-2004, 05:20 PM

Quote:

Originally posted by apechild
You seem to have misinterpreted my words again.

Please re-read my example above, that begins with "under current law." In that example, which shows how things work under current law, there is no double tax. That is exactly the point I was trying to illustrate. The second example then shows what would happen under Kerry's proposal to create a double tax.

No, I didn't. Please re-read my retort.

apechild · 04-13-2004, 05:26 PM

Are you serious?

HarmlessRabbit · 04-13-2004, 06:04 PM

Quote:

Originally posted by apechild
Are you serious?

Yes. Are you? Did you read my response? I believe my point is clearly stated in the WSJ article.

Lebell · 04-13-2004, 06:25 PM

"What we got here is a failure to communicate." <bam!>

-from Cool Hand Luke

queedo · 04-13-2004, 10:56 PM

Kerry is going to say anything to ge ellected, in all reality this idea of his wouldn't work unless you make it more agreeable for big businesses to stay in the US which I doubt he could do.

Dostoevsky · 04-15-2004, 08:21 PM

When I read about Kerry's economic ideas I really wonder whether or not he has any grasp on economic fundamentals. Let the free market take jobs where it may. We will all be better off for in it the end. He will stifle economic growth worldwide by creating artificial barriers that prevent the movement of jobs and industries. Bush's actions are turning the recession that Clinton's administration helped send us into around. Everything will be fine. We don't need any radical economic actions from the Whitehouse to straighten out our economy.

HarmlessRabbit · 04-16-2004, 06:00 AM

Quote:

Originally posted by Dostoevsky
When I read about Kerry's economic ideas I really wonder whether or not he has any grasp on economic fundamentals. Let the free market take jobs where it may. We will all be better off for in it the end. He will stifle economic growth worldwide by creating artificial barriers that prevent the movement of jobs and industries. Bush's actions are turning the recession that Clinton's administration helped send us into around. Everything will be fine. We don't need any radical economic actions from the Whitehouse to straighten out our economy.

Bush has been equally as protectionist, if not more. His steel import tariffs were only removed when the WTO was about to slap some *major* fines on the USA. The tariffs were politically motivated.

Personally, I think the "free market" has been proven totally wrong in the past few years. The Savings & Loan crash, the Enron scandal, the .com crash, how many more billions need to be lost? A mostly free market with heavy government oversight for cheating, for monopolistic behavior, and for regulatory compliance seems like the right path to me.

I think recent history has shown that the free market exploits the public, the workers, and the shareholders for the profit of upper management. I see no reason to believe that a free market for jobs worldwide would be any different.

Are there any examples that you can cite where job offshoring has made a company radically more competitive?

03-26-2004, 11:17 AM	#2 (permalink)
Sparhawk Dubya Location: VA	It looks like a smaller program in scope than Bush's reckless tax cuts - I also like the fact that it is offset with closing the tax deferral loophole. Kerry seems to be following in Clinton's shoes - mix of targeted tax raises and cuts - hopefully this strategy will carry him to the success Clinton had in '92. __________________ "In Iraq, no doubt about it, it's tough. It's hard work. It's incredibly hard. It's - and it's hard work. I understand how hard it is. I get the casualty reports every day. I see on the TV screens how hard it is. But it's necessary work. We're making progress. It is hard work."

03-26-2004, 11:32 AM	#4 (permalink)
Halx Please touch this. Owner/Admin Location: Manhattan	He stole that idea from me __________________ You have found this post informative. -The Administrator [Don't Feed The Animals]

03-26-2004, 12:59 PM	#6 (permalink)
Yakk Wehret Den Anfängen! Location: Ontario, Canada	It is a pay-as-you-go tax cut. Fiscal responsibility! OMG! Will it prevent offshoring? Nope. But, a heavy hand on the economy is a bad idea. You influence the economy, you don't force it. __________________ Last edited by JHVH : 10-29-4004 BC at 09:00 PM. Reason: Time for a rest.

03-28-2004, 03:48 PM	#8 (permalink)
mml Adrift Location: Wandering in the Desert of Life	Overall, I am pleased with the program. I do have some concerns about the U.S. being the only country to tax foreign profits, but the offset in reducing domestic taxes will help curb this. This is a complicated plan(as it should be) and I do not have a complete grasp on all of the details, but it gives us an idea about where Kerry would like to take this country. I do, however, believe that in a global economy, jobs will be exported, and others imported. We as a nation need to consider how we would like this inevitability(sp?) to occur. __________________ Human beings, who are almost unique in having the ability to learn from the experience of others, are also remarkable for their apparent disinclination to do so." -Douglas Adams

04-12-2004, 01:53 PM	#13 (permalink)
apechild Crazy Location: Vermont	So Kerry thinks that putting US firms at a financial disadvantage when competing overseas will help the US economy? Interesting... __________________ Skwerl. Its wuts fer dinner.

04-07-2004, 07:42 PM	#12 (permalink)
orphen Insane	blah Kerry's lack of plan for the future of our economy is kind of disturbing... but then, he did go to the same high school as me.. i guess he's better than Bush... i talked to some old teacher in Andover and they said Bush was probably the last person you'd expect to be president...

04-13-2004, 10:17 AM	#18 (permalink)
BigGov WoW or Class... Location: UWW	The biggest factor is wages. Plain and simple. Americans were able to get factory jobs and get paid a decent amount of money. Only problem is a "decent amount" in the USA is a fortune in other countries. The jobs have been basically "outbided". Why pay someone $50,000 a year when someone over here will do it for $5,000? They ain't coming back. Well, basic economics says that. If some moron forces manufacturing jobs back into the USA there isn't going to be any good because of it. __________________ One day an Englishman, a Scotsman, and an Irishman walked into a pub together. They each bought a pint of Guinness. Just as they were about to enjoy their creamy beverage, three flies landed in each of their pints. The Englishman pushed his beer away in disgust. The Scotsman fished the fly out of his beer and continued drinking it, as if nothing had happened. The Irishman, too, picked the fly out of his drink but then held it out over the beer and yelled "SPIT IT OUT, SPIT IT OUT, YOU BASTARD!"

04-13-2004, 11:00 AM	#20 (permalink)
onetime2 Junkie Location: NJ	Alright, things are starting to get pretty personal in the exchanges in this thread. Can we take a step or two back and come at this from a different angle? __________________ Strive to be more curious than ignorant.

04-13-2004, 11:51 AM	#21 (permalink)
Lebell Cracking the Whip Location: Sexymama's arms...	Knock off the personal comments everyone. __________________ "Of all tyrannies, a tyranny exercised for the good of its victims may be the most oppressive. It may be better to live under robber barons than under omnipotent moral busybodies. The robber baron's cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end, for they do so with the approval of their own conscience." – C. S. Lewis The ONLY sponsors we have are YOU! Please Donate!

04-13-2004, 01:13 PM	#23 (permalink)
apechild Crazy Location: Vermont	Fine, but let me first remind everyone that only profits, not revenues are taxed, and that profits are the result of revenues less expenses. So a US firm (XYZ co) builds a semiconductor factory in Taiwan, and sells most of those semi-conductors back to US customers. The corporate income tax rate in Taiwan is 25%, whereas in the US it's 35%. Labor costs in Taiwan are lower than they are in the US, but additional administrative and legal expenses are incurred by operating in a foreign country, and additional shipping costs must also be incurred. Under current law, XYZ co takes in $100mm in revenues from the sale of these semiconductors back to the US market. Labor costs are $35mm Raw materials costs are $20mm Overhead costs (depreciation of plant and equipment , electricity, etc.) run $5mm Administrative expenses are $4mm Shipping expenses are $1mm Net income before taxes are (100-35-20-5-4-1)= $35mm Less Taiwan corporate income taxes = 35 * .25 = $8.75 Leaves net income of 35 - 8.75 = $26.25mm Under Kerry's proposal all of the above remains the same except $26.25mm less US corporate income taxes = 26.25 * .325 = $8.53 Leaves net income of 35 - 8.75 - 8.53 = $17.72mm Meanwhile, Taiwan Semiconductor Co makes similar products and faces similar labor, materials, and administrative expenses, but is not subject to US income taxes. It uses its comparative advantage to lower prices to a level that squeezes XYZs margins dry. XYZ shuts down its facility, fires a bunch of employees, and buys pre-made components from Taiwan semiconductor, which, coincidentally, just bought a new prodcution facility at fire-sale prices and, absent any real competition, decides now is a good time to raise prices 20% across the board. Ouch! One last point I want to make is that kerry's pledge to "create" 10 million new jobs means that we will have to outsource more work. Why? As of March of this year, there were only 8.4 million unemployed persons in the US (source: Labor Department). That means we'll have to hire 1.6 million foreign workers to fill the rest of the jobs once our unemployment rate hits 0.0% __________________ Skwerl. Its wuts fer dinner.

04-13-2004, 01:21 PM	#24 (permalink)
apechild Crazy Location: Vermont	let me keep going with this. The alternative scenario for XYZ - domestic production of semiconductors: XYZ co takes in $100mm in revenues from the sale of its semiconductors back to the US market. Labor costs are $85mm Raw materials costs are $20mm Overhead costs (depreciation of plant and equipment , electricity, etc.) run $5mm Administrative expenses are $1mm Shipping expenses are $0mm Net income before taxes are (100-85-20-5-1)= $11mm net loss In this alternative, Kerry's ostensible "incentive" to bring jobs back home fails miserably, because the prosperous US worker simply costs much more than the global market for semiconductors will sustain. So in either case, XYZ co is the loser and Taiwan Semiconductor is the winner. Now, a corporate tax policy that would actually help US businesses and encourage them to hire and expand would be to reduce US corporate taxes to a level more competitive with the rest of the world - somewhere in the mid 20% area. Just look at what Ireland has accomplished in the last few years since it cut its corporate income tax rate. __________________ Skwerl. Its wuts fer dinner.

04-13-2004, 05:26 PM	#29 (permalink)
apechild Crazy Location: Vermont	Are you serious? __________________ Skwerl. Its wuts fer dinner.

04-13-2004, 06:25 PM	#31 (permalink)
Lebell Cracking the Whip Location: Sexymama's arms...	"What we got here is a failure to communicate." <bam!> -from Cool Hand Luke __________________ "Of all tyrannies, a tyranny exercised for the good of its victims may be the most oppressive. It may be better to live under robber barons than under omnipotent moral busybodies. The robber baron's cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end, for they do so with the approval of their own conscience." – C. S. Lewis The ONLY sponsors we have are YOU! Please Donate!

04-13-2004, 10:56 PM	#32 (permalink)
queedo Shodan	Kerry is going to say anything to ge ellected, in all reality this idea of his wouldn't work unless you make it more agreeable for big businesses to stay in the US which I doubt he could do. __________________ If you think you can or you can't, you are right!

04-15-2004, 08:21 PM	#33 (permalink)
Dostoevsky Psycho Location: Macon, GA	When I read about Kerry's economic ideas I really wonder whether or not he has any grasp on economic fundamentals. Let the free market take jobs where it may. We will all be better off for in it the end. He will stifle economic growth worldwide by creating artificial barriers that prevent the movement of jobs and industries. Bush's actions are turning the recession that Clinton's administration helped send us into around. Everything will be fine. We don't need any radical economic actions from the Whitehouse to straighten out our economy. __________________ Pride is the recognition of the fact that you are your own highest value and, like all of man’s values, it has to be earned. It is not advisable, James, to venture unsolicited opinions. You should spare yourself the embarrassing discovery of their exact value to your listener. Ayn Rand, Atlas Shrugged