After Raising Taxes in Health Care, House Moves to Raise Taxes

By March 23, 2010Economy, Taxation, Trade

The House is set to begin debate on H.R. 4849, Small Business and Infrastructure Jobs Tax Act, yet another “jobs bills.”

The National Association of Manufacturers has sent a letter to the House opposing the bill’s international tax provisions, arguing that they represent new and discriminatory taxes on foreign-owned companies and U.S. multinationals.

For one thing, it’s almost never a good idea to violate treaties, especially when the action makes your country a less attractive place to invest. From the NAM letter:

The limitation on treaty benefits would violate many of the bilateral tax treaties currently in effect between the United States and foreign countries because it would require companies to pay higher than negotiated withholding tax rates on payments to their foreign affiliates. If enacted, the proposal could lead to retaliatory actions by other countries or withdrawal by our treaty partners from existing treaties, harshly affecting U.S.-based businesses.

Americans for Tax Reform also objects to the legislation because it amounts to a $7 billion tax increase. ATR’s analysis:

If enacted, corporations who engage in business with the United States would face a whopping $7.7 billion in tax hikes. It is vital to remember that these “foreign” companies are engaged in doing business in the United States, providing jobs to U.S. workers, and goods to U.S. consumers. If
enacted, these tax hikes will ultimately be passed onto American families. Consumer goods will become more expensive, some businesses will cut jobs, or even close their doors. Economic activity throughout the United States would plummet. Workers in other industries who rely on these foreign companies for goods and services will feel the effects, and will also be forced to raise costs and lay off workers, leading to a chain reaction that will be extremely damaging to the U.S. economy.

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