Obama moves to discourage domestic investment, calls it "reform"

The Obama White House has released a plan to "reform" corporate taxes. As I've said repeatedly in this blog, the United States has the dubious distinction of being second highest in corporate taxes (behind Japan). Fortunately, Obama recognized this problem and is moving to correct it. He's lowering our current rate of 35% all the way down to 28%, which moves us from second highest all the way to the coveted spot of...fourth, and still way above the OECD average.

Fantastic!

If that wasn't good news enough, get this. The tax plan also introduces a new "global minimum tax" on earnings overseas. That means that companies that earn money globally would have to pay a tax on that money. That's right, those darn evil corporations won't be able to hide their money overseas anymore! We'll really stick it to them!

Except taxes like that affect money when it is repatriated. It taxes money that comes back into the states. In other words, this global minimum tax actually discourages the repatriation of funds back into the states. That means less money made overseas being invested here at home.

But don't take my word for it! Why don't we hear from Obama's own economic counsel?

While most other developed nations have adopted territorial systems that exempt most or all foreign income from taxes when they are repatriated, the U.S. subjects all worldwide earnings to the corporate income tax when they are brought home to the U.S. This approach actually encourages U.S. companies to keep their earnings abroad rather than investing them here at home. Adopting a territorial tax system would bring us in line with our trading partners and would eliminate the so-called “lock-out” effect in the current worldwide system of taxation that discourages repatriation and investment of the foreign earnings of American companies in the U.S.

James Pethokoukis analyzed the plan.

4. Obama and Geithner apparently still don’t understand how harmful corporate taxes are. Here’s the OECD: “Corporate taxes are found to be most harmful for growth, followed by personal income taxes, and then consumption taxes.

5. Obama and Geithner apparently still don’t understand who bears the burden of corporate taxes. It’s workers. AEI economists Kevin Hassett and Aparna Mathur have found that “corporate tax rates affect wage levels across countries. Higher corporate taxes lead to lower wages. A 1 percent increase in corporate tax rates is associated with nearly a 1 percent drop in wage rates.”

6. Obama and Geithner apparently don’t understand that “corporate income taxes have a highly significant and negative effect on long-term growth,” according to the Tax Foundation:

That graph shows a pretty clear correlation between higher taxes and low economic growth.

"But what about revenue? We need that money so that the government can function!"

I'm glad you brought up that point. We are in luck here; our pals the Brits just raised the taxes on the wealthiest citizens dramatically (to 50%) in order to produce more revenue. The result? Revenues went down by more than 500 million pounds!

So, higher taxes on corporations and the wealthy slow economic growth, produce less revenue, and cost money out of each and every citizen's pockets in the ends...

But hey, at least it's fair, right?