NCPA - National Center for Policy Analysis


May 5, 2009

The latest plan for getting America's budget affairs in order involves cracking down on foreign tax havens and tax shelters.  No doubt it will have mass appeal, but it will backfire, and badly, says Investor's Business Daily (IBD).

The White House said Monday it wants to "detect and pursue" tax evaders, while closing tax loopholes and shutting off overseas tax shelters.  And to police it all, it wants to hire another 800 new IRS agents.

Under this tax plan:

  • Companies would no longer be able to write off some expenses in the United States on profits they make overseas.
  • Nor would they be able to reinvest offshore earnings overseas -- a practice which, some claim, totals $700 billion or more in earnings kept abroad.

The idea behind all this is to keep companies from creating jobs in other countries, and to create more here.  But it's a bad idea, from start to finish, says IBD:

  • Most of the jobs U.S. companies create overseas are not highly skilled jobs.
  • Yet, the profits our firms make overseas help us to maintain the managerial and skilled positions here in the United States.

Do we want to drive those investments completely overseas, asks IBD?  And do we really want highly trained American workers to compete with hundreds of millions of unskilled, uneducated laborers in India, China and elsewhere?  It's a recipe for low wages and bad jobs here in the United States.

Source: Editorial, "Taxing Errors," Investor's Business Daily, May 5, 2009.


Browse more articles on Tax and Spending Issues