Kerry's Plan Would Cut After-Tax Return on Capital in Half
March 30, 2004
Sen. John Kerry hasn't proposed a $900 billion tax increase -- the $900 billion is additional spending he has proposed that will have to be paid for some way. He does, however, have a tax plan, explains financial writer Lawrence Kudlow.
- He would cut the corporate income tax rate 1.75 percent, from 35 percent to 33.25 percent.
- However, he would also roll back the Bush tax cuts, which would lower the after-tax return on capital by more than 54.5 percent.
- He would also close a so-called "loophole" that allows U.S. corporations to defer profits on overseas operations; but that tax break is the major relief firms get from the double taxation of overseas profits (first by foreign countries, then the United States).
In contrast, foreign-based competitors of U.S. corporations get a 100 percent tax credit for taxes they pay here because the United States is the only major country that taxes profits worldwide, whereas other countries only tax profits earned domestically.
Kerry argues that deferral of taxes on overseas profits (in the form of a tax credit) encourages firms to outsource jobs abroad. But Kudlow points out that there is far more insourcing of service jobs from foreigners who invest directly in America than outsourcing of U.S. jobs.
Source: Lawrence Kudlow, "John Kerry's Clever Tax Cut Will Silence Market's Boom," Investor's Business Daily, March 30, 2004.
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