The recently House-passed $7.5 billion tax increase on foreign companies doing business in the United States still boggles the mind. It’s a huge tax increase in the farm bill? Adopted via a rule, without any public hearings? Why, because it couldn’t stand the test of scrutiny? (Rhetorical question.)
Politically, it’s foolish. Substantively, it’s even foolisher. As Ag Secretary Mike Johanns has pointed out so sharply, advocates for farmers have now created an entirely new group of opponents, the employees of the targeted firms. Kent Hoover, Washington bureau chief of the American City Business Journals, hits the highpoints in this story.
Foreign-owned companies employ more than 5 million people in the United States. They already pay around $30 billion a year in federal income taxes.
“This bill, if enacted, would clearly violate an array of U.S. tax treaties, invite retaliation overseas, and damage our economy by discriminatorily raising taxes on foreign investment, hampering foreign investment and job creation in the United States,” said Peter Robinson, president of the United States Council for International Business.
Manufacturing would be hit especially hard by the higher taxes, according to the National Association of Manufacturers.
Foreign-owned companies employ one out of every eight factory workers in the United States.
Rep. Pat Tiberi, R-Ohio, whose district is home to a Honda plant, said the bill would “threaten the livelihood of 13,000 workers in my area.”
Time to mention that Tax Foundation study again.
Washington, DC, July 24, 2007 – The U.S. has the second-highest corporate tax rate in the OECD and is one of only two countries that have not reduced their rates since 1994, according to a new review of international tax rates by the Tax Foundation.
Five countries cut their corporate income tax rates in 2006, seven more will have cut their rates by the end of this year, and Germany recently announced a planned cut on January 1, 2008.
So you have foreign-based companies, already familiar with European operations. The United States is increasing taxes on them, while European Union member countries are cutting theirs. Care to predict what happens?
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