This is What I Mean

June 23rd, 2011 at 2:55 pm

Re my principles for enacting good policies and avoiding bad ones, someone showed me this oped on how to link a repatriation tax holiday to capitalizing an infrastructure bank. Here’s the linkage mechanism:

“In return for obtaining the cash infusion of overseas profits into the infrastructure bank, the Treasury would forgo taxation on a schedule set by auction. By a bidding mechanism, the Treasury would obtain the best deal offered for funding an amount, say $100 billion, in the infrastructure bank.”

If that sounds like a good idea to you, you’re made of hardier stuff than me.  No matter how you dress it up, this is a wasteful tax shelter, one that teaches multinationals that if they defer taxation on their overseas’ profits long enough, we’ll eventually let them bring ’em home at a huge discount.

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4 comments in reply to "This is What I Mean"

  1. readerOfTeaLeaves says:

    First quick reaction, since another browser window shows at Financial Times that the GOP has walked out of budget meetings and now insists on Obama entering ‘negotiations’ is that this may be some kind of political squeeze-play set up to force this through as a ‘compromise’.

    In other words, political honey set out around the time the GOP walks out to ‘up the ante’.

    Maybe they’re not related.
    But out here in the peanut gallery away from DC, it’s hard to believe that Grover Norquist or one of his minions isn’t mixed up in this somewhere – a political ploy to set up the Dems to appear to be ‘unreasonable’.

    It’s one more instance of the GOP-Lucy holding up the football and telling Charlie Brown to come kick it.
    Here’s hoping Charlie tells Lucy where she can stuff her football. (Now *that* would be ‘change’…)

    In other words, most economics now looks like politics.
    I have no idea whether that’s good or bad.
    It just ‘is’.

  2. jonathan says:

    The idea fails using the GOP’s standard logic: this is, as you say, an incentive to move resources, production, profits and jobs overseas because after a few years of waiting you will be able to bring those profits into the US at lower cost. The logical structure of the GOP’s arguments has been based on market incentives. This is a market incentive to move operations overseas.

  3. spiral says:

    Mr. Bernstein,

    What I question is why do we give our corporations the privilege to withhold taxation on foreign income; after all individuals do not have that privilege. They, the individuals are taxed on their worldwide income (minus tax credit for tax already paid to a foreign government to avoid double taxation).

    Given that our very illustrious supreme court has ruled that corporations are more and more like individuals, why the different treatment?

    By the way, I recall that this privilege for the corporations are of a recent origin.

  4. Michael says:

    Seems to me that this is a problem which would be a good use for all these new executive powers of detention without trial or charges.