The U.S. needs an infrastructure upgrade, and somebody’s gotta pay the bill. President Barack Obama is proposing a novel solution to upgrade our aging roads and bridges while sparing the middle class from the obligatory tax increase: Tax U.S. corporate profits that are parked overseas. According to the Washington Post, Obama wants to offer a one-time deal of a 14 percent tax for this year, followed by a 19 percent tax thereafter. This would encourage U.S. corporations to bring home their foreign-parked profits now, stimulating the U.S. economy.
Currently, U.S. corporations pay no taxes on profits earned outside our borders until they bring the money home. Roughly two trillion dollars in U.S. corporate profit is estimated to be stashed overseas, meaning a huge chunk of tax revenue that could be freed from the working and middle classes. Obviously, however, businesses and political conservatives will view Obama’s proposed tax as anti-business and punitive toward wealthier citizens, who are heavily invested in owning and running America’s multinationals. Fox News reports that Republican budget guru Paul Ryan, the 2012 vice presidential nominee, is opposed to the tax and says the president is trying to exploit “envy economics.”
In reality, Obama is offering a shrewd deal that benefits everyone. Currently, U.S. corporations pay up to 35 percent corporate tax on the overseas profit they bring home, resulting in the widespread practice of simply leaving the money overseas. Obama wants to lower the overall corporate tax rate to only 28 percent, giving corporations a domestic break, while taxing overseas profit at 19 percent instead of zero. By giving a little on the home front, Obama removes much sympathy for corporations who park their gains offshore.
On the moral and ethical front, it is hard to argue that U.S. corporations should not pay taxes on their foreign profits. U.S. corporations, regardless of where they sell their goods and services, benefit greatly from American public goods and services, especially public education. U.S. multinationals also benefit from American diplomacy and military strength, which can keep these corporations from being bullied by foreign governments. Given these benefits in achieving foreign profits, should American corporations not chip in from those profits?
