NCPA - National Center for Policy Analysis

Kerry Economic Plan Could Raise Unemployment

March 31, 2004

John Kerry says his economic plan will create 10 million new jobs. However, it relies primarily on two tax gimmicks of dubious value. One would penalize U.S. companies with foreign operations to pay for a cut in the corporate tax rate. The other would revive a discredited job subsidy plan that has been tried before and failed, says Bruce Bartlett.

There are many problems with John Kerry's plan to tax the unrepatriated overseas profits of U.S. companies, says Bartlett:

  • The main one is that few other countries tax the foreign profits of their companies at all.
  • Consequently, U.S. firms are already at a competitive disadvantage tax-wise.
  • Kerry's plan would make the situation worse, encouraging U.S. companies to reincorporate in other countries.

As far as jobs are concerned, the Kerry plan probably would reduce employment in the United States, explains Bartlett:

  • That is because a very considerable amount of exports go from U.S. businesses to their foreign affiliates.
  • And, contrary to what Kerry implies, most earnings on sales by foreign affiliates are repatriated to the United States, offsetting a significant portion of the trade deficit.

Imposing tax penalties on corporations is not going to create more jobs here, but more likely will reduce their exports and the employment it supports, says Bartlett.

Source: Bruce Bartlett, "Kerry Economic Plan is Unstimulating," National Center for Policy Analysis, March 31, 2004.


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