A Political Glimpse from Ireland

The Economy Looms Large

I do feel a little bad(seriously) for Senator McCain recently, because with inflation on the rise while wage increases remain minimal, he is feeling the heat with regards to wanting to extend the bush tax cuts. The problem as suggested by the Democrats and liberals like myself is that these tax cuts benefit the rich but do nothing for the largest portion of Americans a.k.a the middle class. Senator McCain is ignoring this issue and is beating the same old national security “drum” in the hopes that the American people will fall for it again however General Clark explains how very little relevant experience Senator McCain actually has:

Divided Taxation

The Renewable Energy and Job Creation act of 2008 was recently rejected in the Senate this week with 50 yeas and 44 nays. The vote embodies the typical democrat and republican divide with republicans wanting to preserve the benefits of business while democrats want to redistribute those benefits to the people through the form of taxation. The nays were exclusively Republican while there were 3 Republican Senators who voted yes. What are the Republicans fighting for? Do companies provide tangible benefits through the tax breaks and incentives they receive? The U.S does not have the lowest tax rate in the world yet 5 of the world’s biggest 10 companies are based here.

The very word ‘incentive’ implies that it is optional; a company is not required to execute an operation upon the receipt of the incentive therefore the logical conclusion leads me to believe that the Republican segment of the Senate is out of touch with the average citizen. This is where “change” arrives; politics has always run as described in the first paragraph but how about introducing legislation that taxes positively? Why can the Republicans not realize that giving company’s free reign is not good while Democrats realize that redistributing income is just going to make companies move to the Moon.

People assume that the reason a company chooses a location is because of the lowest tax rate however that may be a large factor, there are also smaller factors like the labor pool, environment, education system, political system etc… A low tax rate does not guarantee economic success as demonstrated by Ireland whose GDP dropped by 2.9% from 2007 to 2008. There is also the problem of many American companies moving production off shore yet unsurprisingly, the Republicans are going to wait for the Democrats to create incentives for companies to keep jobs in America:

At issue is the U.S. tax code’s treatment of profits earned by foreign subsidiaries of American corporations. Profits earned in the United States are subject to the 35% corporate tax. But multinational corporations can defer paying U.S. taxes on their overseas profits until they return them to the USA - transfers that often don’t happen for years. General Electric, for example, has $62 billion in “undistributed earnings” parked offshore, according to recent Securities and Exchange Commission filings. Drug giant Pfizer boasts $60 billion. ExxonMobil has $56 billion.

The U.S currently taxes companies on profits earned in-country and overseas which provides significant income for the treasury. My suggestion (slightly different to the bill) is that we should raise the tax rates at home for companies with over $1 Billion dollars in assets located overseas encouraging companies to shift these assets to the United States to keep their tax liability low. Taxation can be a positive aspect in any economy as long as it is utilized as a gentle push rather than a shove. The Republican Senate prefers we not push at all which has only increased the number of corporate scandals in the last 8 years while big companies continue to expand their operations overseas at the expense of the American market.

I recently found this video on YouTube when I was searching for stories related to Corporate Tax Breaks, I found the presenter quite entertaining given the seriousness of this issue: