Are American World Wide Businesses Overtaxed?

Rethinking U.S. Taxation of Overseas Operations

The United States produces a third of the world’s wealth but contains less than 5 percent of the world’s population.  This disparity pushes many U.S. businesses and entrepreneurs to embrace globalization to improve productivity and expand market reach.  Large and small businesses alike are increasingly using the tools of faster information, cheaper transportation and overseas workforces that blur the traditional notions of taxes and services based on geographic lines, says Joseph Henchman, vice president of legal & state projects at the Tax Foundation.

This trend of globalized business relations and trans-market activity has forced many governments to reassess their tax structures, specifically in regard to how they treat international activity.  Two options are widely implemented:

• The worldwide system that is used in the United States burdens all American businesses with corporate taxes, regardless of their location around the world.
• A territorial system, which is much more widely used by developed economy, taxes only those operations within a country’s geographic boundaries and leaves the taxation of its own companies operating abroad to foreign governments.

As the United States is one of the few developed nations that still maintains a worldwide system, its businesses with foreign operations face significantly greater compliance costs than international competitors.  Stipulations within specific provisions of the corporate taxation system of these companies allow them to defer IRS taxes on certain forms of income if that money is not repatriated.  While this helps to offset the natural disadvantage created by the complicated tax system, it discourages remittances back to domestic operations.

Were the United States to move towards a territorial tax system, the outlook for American businesses operating abroad and the economy as a whole would be brightened.

• American companies would face fewer compliance costs and would not have to dedicate as many resources to inefficient accounting efforts to calculate and minimize tax burdens.
• Such a policy would create greater tax parity between American and foreign companies, allowing them to compete more equitably.
• A territorial tax would also remove impediments that discourage foreign firms from headquartering in the United States.

Source: Joseph Henchman, “Rethinking U.S. Taxation of Overseas Operations: Subpart F, Territoriality and the Exception for Active Royalties,” Tax Foundation, November 22, 2011.

For text:

http://www.taxfoundation.org/publications/show/27788.html

For more on Tax and Spending Issues:

http://www.ncpa.org/sub/dpd/index.php?Article_Category=25

Who’s Blowing Up Iran?…by Michael Ledeen, Interviewed by Dennis Prager

Yesterday, Friday, Dennis interviewed Michael Ledeen, the author of the following article about turmoil in Iran.  It was a compelling interview especially when one thinks about the barbarity of the ‘ins’ running  Iran’s Islamic dictatorship.   Think of the sacrifice and horror those within this regime who are doing their best to scuttle it in the name of civilized human behavior!

Michael Ledeen is a regular at Pajamas Media:        WHO IS BLOWING UP IRAN?

“Another week, another explosion at or near an Iranian military installation (or is it a nuclear research facility?).  As usual, the regime doesn’t know what to say.  The mullahcracy is so intensely divided that different “spokesmen” from different ministries/news outlets/cults/mafias put out different versions.  There was an explosion, or at least “the sound of an explosion.”  This goes out on the wires.  Then, no, there was no explosion, it was just the sound of our fierce military training.  Then again, yes, there was something, but not to worry, just go home and shut up.  And so it goes in the Islamic Republic of Iran, as our president so loves to call his intended international partners.

I’ve been reporting for many months about the ongoing sabotage of pipelines, refineries, military sites, Revolutionary Guards’ aircraft and trains, and groups of regime thugs. and have received the usual cold shoulder from publications “of record,” which is to say silent sneers.  But the tempo of attacks, most notably the monster blast a week ago that vaporized General Moghaddam and his foreign visitors (at least some of whom had taken the shuttle from Pyongyang to be with him on what they wrongly expected would be a happy day) led the Washington Post’s man in Tehran, Thomas Erdbrink, to note the phenomenon in a useful story entitled “Mysterious Explosions Pose Dilemma for Iranian leaders.”  He gives us a pretty good rundown of the explosions, and, living as he does in Tehran, gives ample space to regime “explanations” such as bad welding, western sanctions, and so forth.  Given the number of foreign journalists who have come to a bad end in Iran, you’d do the same.

Safe in London, on the other hand, Roger Cohen of the New York Times has no doubt about what’s happening:  his guy Obama is waging a secret war against the mullahs. “It would take tremendous naïveté,” he lectures the great unwashed,  “to believe these events are not the result of a covert American-Israeli drive to sabotage Iran’s efforts to develop a military nuclear capacity. An intense, well-funded cyberwar against Tehran is ongoing.”

So color me tremendously naive.  I would really love to believe Roger Cohen;  the very idea that Obama, at long last,  has ordered a response to the Iranian war against the west (totally unmentioned, needless to say), is delightful.  But I don’t believe it, and Cohen doesn’t give us any evidence for it, aside from intoning, as the mullahs themselves are so wont to do, that it’s the infidels and the Zionists.

Yes, there’s a cyberwar, but Revolutionary Guards generals don’t get vaporized by Stuxnet.  And Cohen’s judgment is so swayed by his fandom for Obama that it verges on the worst of the early Chris Matthews.  Try this, for example:

Foreign policy has been Obama’s strongest suit. He deserves great credit for killing Osama bin Laden, acting for the liberation of Libya, getting behind the Arab quest for freedom, winding down the war in Iraq, dealing repeated blows to Al Qaeda and restoring America’s battered image.

I suppose some copy editor took out “ordering the” before “killing” and the “of” right after it, but sure, full marks for seeing it through.  As for the Libyan, Egyptian, Tunisian and Iraqi decisions, the jury’s out, and seems to be leaning against Cohen’s client nowadays.  The blows to Al Qaeda–by which he is referring to drone attacks and the like–are fine, albeit the really vicious body blow was the defeat of AQ and their sponsors in Iraq.  If you think our national image has been “restored” under this president as a result of his great foreign policy, more power to you.  Ring up Roger in London, maybe he’ll give you tea.

Since I’m pretty much the only guy in town who forecast the war against the mullahs, and it’s now so obvious that even MSM reporters and columnists can mention it without blushing, I’m sticking to my story.  I don’t think the ongoing assault against the regime is coming from outside Iran.  I think it comes from the Iranian opposition within the country.  And I think it shows that the opposition is a great deal stronger than the experts have opined.

If you were Supreme Leader Ali Khamenei, what would you be saying to that unhealthy face in the mirror?  You’d say, “they come and go at will;  they obviously have the full cooperation of traitors at very high levels of the regime, even inside the Guards.  They not only knew Moghaddam was going to be there, but exactly where and when.  Now Isfahan, another heavily guarded base.  That doesn’t look like Zionists and infidels, whose pathetic collaborators we round up easily over and over again;  it looks like people who are trusted and supported by the traitors in my own house.”

When a regime cracks, even very high officials start to do favors for the opposition, hoping to avoid the worst if the regime comes down.  Khamenei knows that the head of the shah’s secret intelligence service went on to hold the same position under the fanatical Ayatollah Khomeini.  Recent events will have convinced the supreme leader that his own security may be as compromised as the shah’s was.

Add to this the dreams common to regular users of opium (Khamenei is one of them) and you’ve got a very explosive situation.”

Comment:   What weed was  Roger Cohen smoking  when he wrote the LIE about his GUY Obama  advancing the interests of civilized people fighting pure evil?

Obama is a Marxist by religious training, graduating from Harvard and Columbia and Jeremiah GODDAMN AMERICA Wright’s temple of black racism in Chicago.   Such sects do not advertise much about  good and evi.   They promote class and race warfare insteadl.   The only important policy is converting Americans to Marxism to live equally under the politics of  Obamacrats.

Have you bought your fluorescent bulbs yet?   How about the  environment friendly flush toilets?   One of your young ones graduate from an American university yet?     Have  folks  in your neighborhood  or family begun to list their entitlements for breathing, yet?     That is what Obama is concerned about……not the bestiality occuring in Iran.

What Pet Political Projects Profit from the $.49 Tax per Gallon YOU Pay at the Pump?

Paying for Pet Projects at the Pump

The federal and state governments levy taxes on gasoline and diesel fuel primarily to fund highway construction and repair.  These taxes average nearly 49 cents on every gallon of gas purchased.  However, a significant portion of revenue is diverted to other purposes, such as education and public safety.  In addition, states dedicate some of their revenues to nonroad projects mandated by the federal government, say Brian Bodine, a graduate student fellow and Pamela Villarreal, a senior fellow, at the National Center for Policy Analysis.

• A one cent per gallon federal gasoline tax was first enacted in 1932.
• Today, it is 18.4 cents.
• Sixty percent of federal gas tax revenue goes to highways and bridges, and the remainder is earmarked for specific programs, such as repairing lighthouses, paving bike paths and building museums.

The Federal Highway Administration (FHA) uses a complex series of calculations to allocate funds to the states to build and repair highways, including the interstate highway system, and for other transportation projects.

• Motorists in half of the states, including Texas, pay more taxes into the fund than their state receives back in federal apportionments.
• Indeed, U.S. Department of Transportation data show that for every dollar Texans pay in federal fuel taxes, they received only 83.5 cents back.

On average, American motorists pay 30 cents per gallon in state gasoline taxes.  Like federal taxes, these are used for some nontransportation projects.  For example, the Texas Constitution requires 25 percent of its state gas tax revenue to be spent on public education.  The amount going to other nontransportation items varies from 20 percent to 25 percent, with $600 million to $750 million put toward nontransportation items in 2009.

Legislators claim their state must divert state highway funds due to budget shortfalls and insufficient general revenue.  However, funds diverted to a popular cause, such as education, may displace rather than supplement other funding, say Bodine and Villarreal.

Source: Brian Bodine and Pamela Villarreal, “Paying for Pet Projects at the Pump,” National Center for Policy Analysis, December 2, 2011.

For text:

http://www.ncpa.org/pub/ba761

For more on Tax and Spending Issues:

http://www.ncpa.org/sub/dpd/index.php?Article_Category=25

David Brooks: Why are Nations like Germany and the U.S. Rich?

One of the many reasons I could no longer watch Public Television here in Minnesota was when  David Brooks joined the Lehrer News hour around dinner time, which used to be a must when Paul Gigot represented conservative views opposite the station’s and Liberal Mark Shields corner on views.

Mark always performed well on this Left wing news program.   He had that Irishman’s touch of gab and twinkle in the eye  as if he were talking to you directly from a bar stool at a place called, well, “O’Gara’s Bar and Grill”.      In contrast there was Paul Gigot, a serious and devoted  conservative, but with an occasional  smile, often sitting in front of the camera  as a  Woody Allen-created WASP at a Thanksgiving Day dinner table.   I looked forward to the two regulars every day they appeared on TV.   They both were sharp and entertaining in presenting their cause.

Then Gigot moved up at the Wall Street Journal, and was replaced by pleasant, soft spoken, sensitive, shyguy, David Brooks, who was a conservative perhaps at heart, but had trouble defending anything conservative by conversation.   A perfect  fit for the Progressives at National Public Radio, the progressives progressing feverishly to Marxism.

Below is a good example of  good man and good conservative David Brooks when he is not competing in public with lefties:

The Spirit of Enterprise        by David Brooks at the New York Times:

“Why are nations like Germany and the U.S. rich? It’s not primarily because they possess natural resources — many nations have those. It’s primarily because of habits, values and social capital.

It’s because many people in these countries, as Arthur Brooks of the American Enterprise Institute has noted, believe in a simple moral formula: effort should lead to reward as often as possible.

People who work hard and play by the rules should have a fair shot at prosperity. Money should go to people on the basis of merit and enterprise. Self-control should be rewarded while laziness and self-indulgence should not. Community institutions should nurture responsibility and fairness.

This ethos is not an immutable genetic property, which can blithely be taken for granted. It’s a precious social construct, which can be undermined and degraded.

Right now, this ethos is being undermined from all directions. People see lobbyists diverting money on the basis of connections; they see traders making millions off of short-term manipulations; they see governments stealing money from future generations to reward current voters.

The result is a crisis of legitimacy. The game is rigged. Social trust shrivels. Effort is no longer worth it. The prosperity machine winds down.

Yet the assault on these values continues, especially in Europe.

Over the past few decades, several European nations, like Germany and the Netherlands, have played by the rules and practiced good governance. They have lived within their means, undertaken painful reforms, enhanced their competitiveness and reinforced good values. Now they are being brutally browbeaten for not wanting to bail out nations like Greece, Italy and Spain, which did not do these things, which instead borrowed huge amounts of money that they are choosing not to repay.

The estimated costs of these bailouts vary enormously and may end up being greater than the cost of German reparations after World War I. Germans are being browbeaten for not wanting to bail out Greece, where even today many people are still not willing to pay their taxes. They are being browbeaten for not wanting to bail out Italy, where future growth prospects are uncertain.

They are being asked to bail out nations with vast public sectors and horrible demographics. They are being asked to paper over fundamental economic problems with a mountain of currency.

It’s true that Germans benefited enormously from the euro zone and the southern European bubble, and that German and French banks are far from blameless. It’s true that the consequences for the world would be calamitous if the euro zone cracked up. It’s true that, in a crisis, you do things you wouldn’t otherwise do; you do things that violate your everyday values.

But our sympathy should be with the German people. They are not behaving selfishly by insisting on structural reforms in exchange for bailouts. They are not imprisoned by some rigid ideology. They are not besotted with some semi-senile Weimar superstition about rampant inflation. They are defending the values, habits and social contract upon which the entire prosperity of the West is based.

The scariest thing is that many of the people browbeating the Germans seem to have very little commitment to the effort-reward formula that undergirds capitalism. On the one hand, there are the technicians who are oblivious to values. For them anything that can’t be counted and modeled is a primitive irrelevancy. On the other hand, there are people who see the European crisis through the prism of some cosmic class war. What matters is not how people conduct themselves, but whether they are a have or a have-not. The burden of proof is against the haves. The benefit of the doubt is with the have-nots. Any resistance to redistribution is greeted with outrage.

The real lesson from financial crises is that, at the pit of the crisis, you do what you have to do. You bail out the banks. You bail out the weak European governments. But, at the same time, you lock in policies that reinforce the fundamental link between effort and reward. And, as soon as the crisis passes, you move to repair the legitimacy of the system.

That didn’t happen after the American financial crisis of 2008. The people who caused the crisis were never held responsible. There never was an exit strategy to unwind the gigantic debt buildup. The structural problems plaguing the economy remain unaddressed. As a result, the United States suffers from a horrible crisis of trust that is slowing growth, restricting government action and sending our politics off in strange directions.

Europe’s challenge is not only to avert a financial meltdown but to do it in a way that doesn’t poison the seedbed of prosperity. Which values will be rewarded and reinforced? Will it be effort, productivity and self-discipline? Or will it be bad governance, now and forever?”