March 3, 2009

Obama Versus Tax Dodgers

Marc Comtois

President Obama is going to go after international tax dodgers (h/t):

President Barack Obama's Treasury secretary says the administration will unveil a series of rules and measures in the coming months to limit the ability of international companies to avoid U.S. taxes.

Treasury Secretary Timothy Geithner told the House Ways and Means Committee on Tuesday that Obama will propose legislation to limit U.S. companies' ability to shelter foreign earnings from taxation in the U.S. He also said the administration will try to limit wealthy Americans' ability to use tax havens to avoid taxation.

Unless of course they are nominated for a Cabinet position.

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I think your last line hit it on the head.

Why's he going after tax dodgers? Is it because he still can't find a Secretary of Commerce? Does Geithner need an assistant?

Posted by: Patrick at March 3, 2009 4:11 PM

The more serious issue is the plan to limit the ability for US companies to shelter foreign earnings from US taxation.

The US has one of the highest corporate tax rates in the world. It is effectively lessened by US companies being able to reinvest foreign earnings in foreign operations, thereby avoiding any US taxation.

Again, incentives matter and drive human behavior. If US companies lose the ability to shelter such earnings, their cost of capital will increase, which means they have more incentive to cease being US companies.

I guess they don't teach elementary economics to community organizers. And you wonder why the stock market continues to tank? Amateur hour.

Posted by: Donald B. Hawthorne at March 3, 2009 4:29 PM

"the administration will try to limit wealthy Americans' ability to use tax havens to avoid taxation"

Yeah good luck. It takes NOTHING to fly to Nassau or Zurich or Grand Cayman and open up as many bank or brokerage accounts as you want with easy telephone, ATM and internet access. Just don't be a total fool and put your cash in a place like UBS which has US branches.

Posted by: Mike at March 3, 2009 7:22 PM

Within the next few years don't be surprised to see currency exchange controls to keep people from moving all but a little amount out of the U.S. / out of the U.S. dollar.

The U.S. printing presses are running at banana republic speed, and this is a typical response of such regimes to prevent citizens from escaping a collapsing currency.

Also, don't be surprised to see the reinstatement of FDR's prohibition on citizens owning gold.

Double digit inflation, here we come.

Posted by: Tom W at March 3, 2009 8:33 PM

What keeps any of these CEOs and their companies becoming citizens of other countries? Kinda like people will do to keep a second home in Florida and claim that to be their primary residence for tax purposes, maybe a country like Switzerland or Cayman Islands will become a real business hotspot as large businesses decide to pack up and move their headquarters and let their CEO live in either a ski or beach wonderland while continuing to rack up a $50M a year salary, out of the reaches of the US tax man.

Sure, they can still do business with the US and pay the sales taxes and tariffs and all that, but the executives salaries will be untouched.

Posted by: Patrick at March 3, 2009 8:51 PM
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