U.S. tax code is “full of corporate loopholes that makes it perfectly legal for companies to avoid paying their fair share.”
— President Obama, May 4
By Robert J. Samuelson
The Washington Post
Like it or not, ours is a world of multinational companies. Almost all of America’s brand-name firms (Coca-Cola, IBM, Microsoft, Caterpillar) are multinationals, and the process works both ways. In 2006, the U.S. operations of foreign firms employed 5.3 million workers. Fiat’s looming takeover of Chrysler reminds us again that much business is transnational.
For most people, the multinational company is a troubling concept. Loyalty matters. We like to think that “our companies” serve the broad national interest rather than just scouring the world for the cheapest labor, the laxest regulations and the lowest taxes. And the tax issue is especially vexing: How should multinationals be taxed on the profits they make outside their home countries?
Listen to President Obama, and the status quo seems a cesspool. Pervasive “loopholes” engineered by “well-connected lobbyists” allow U.S. multinationals to skirt American taxes and outsource jobs to low-tax countries. So the president proposes plugging loopholes. Some jobs will return to the United States, he said, and U.S. tax coffers will grow by $210 billion over the next decade.
Sounds great — and that’s how the story played. “Obama Targets Overseas Tax Dodge,” headlined The Post. But the reality is murkier; the president’s accusatory rhetoric perpetuates many myths.