Right now, the U.S. tax code gives multinational corporations tax breaks for moving jobs overseas. President Obama not only wants to eliminate those tax breaks, but plans to create a new tax credit for companies that bring jobs back home.
In contrast, Mitt Romney’s tax plan would not only protect those existing tax breaks, but would create larger incentives for companies to ship U.S. jobs overseas. In fact, according to a new economic analysis, Romney’s economic plan could actually create 800,000 jobs in foreign countries.
Romney would eliminate all taxes on the foreign profits of U.S. companies. Currently, U.S. corporations don’t have to pay U.S. taxes on profits earned overseas until those profits are brought back into the United States. If elected, Romney would completely eliminate all U.S. taxes on these profits. Therefore, for the first time in modern history, an American company could move a factory overseas and never pay a single dollar in U.S. taxes on the profits generated by that factory.
Eliminating taxes on foreign profits could create 800,000 jobs overseas. No longer required to pay taxes on foreign profits, companies would now have new incentives to move their operations out of the United States. Economist Kim Clausing, an expert in international taxation, estimated that Romney’s plan to eliminate these taxes could lead to the creation of 800,000 jobs overseas. These jobs, created in China and other countries, could replace American jobs, drive down the wages of American middle-class workers, and undermine our economic recovery.
Romney’s plan would also undercut the U.S. tax base. Free to avoid paying taxes back home on profits earned abroad, multinational corporations could exploit accounting rules to make it appear that a large share of their profits are earned overseas. This gimmick would further undermine the U.S. tax base, which could increase the deficit and force small businesses and middle-class families to bear a higher share of the tax burden.
President Obama’s plan reduces the incentive to move operations overseas, and instead, creates a new 20 percent income tax credit that helps companies cover their moving expenses and bring their operations back to the United States. And to create a more level playing field for American businesses, the President has proposed a minimum tax on foreign earnings, which will reduce incentives for moving profits offshore.
The choice between President Obama and Mitt Romney is the choice between two fundamentally different economic visions: President Obama would reward companies for creating jobs in America, and Romney would reward companies for creating jobs in other countries. The choice is that stark and that clear.