Monday, July 16, 2012
All through the campaign, candidate Romney has been telling us he has the experience and the ideas to create jobs. How to verify this claim? There's the problem. Finally, we have some data. A new study by economist Kimberly Clausing provides the independent verification everyone has been looking for demonstrating that Romney's team actually does have a workable plan for reforming international corporate taxation, a plan that is is likely to create as many as 800,000 jobs.
One small problem, however. These 800,000 jobs? They're not coming to America. They are going to be created in places like Canada, China, the Netherlands, Germany and Mexico.
At this point, I should explain some basic and not-so-basic concepts of corporate taxation, which is difficult for me because I must admit that corporate taxation was never a subject that interested me all that much back in law school. I took the introductory course in personal income taxation, and that pretty much did it for me, tax-wise. Thankfully, there are people like Professor Clausing, who do take an interest in this stuff, and can tell you that there are at least a couple of different approaches to reforming the international corporate taxation system. One is to require multinational corporations to pay a minimum tax on foreign income earned in countries with low corporate tax rates, and to crack down on practices that allow corporations to book economic activity in such countries while taking deductions and credits in the United States. Another approach is to move to a territorial system that would make the foreign income of U.S. multinational corporations completely exempt from U.S. taxation.
You can probably guess which approach is favored by the Obama administration and which by the Romney campaign.
It's not really so difficult to understand that Romney's plan to eliminate taxes on foreign profits would incentivize US corporations to move operations overseas. Not surprising, either, that such a plan would come from someone whose business career was based on maximizing value for corporate investors regardless of the effects on employees. What's remarkable is that economists are able to calculate the likely number of jobs that would be created abroad as a result of Romney's proposed reforms.
Thanks to the Obama campaign for creating this cool graphic that shows where the jobs that Romney is promising are likely to be created: