Saturday, March 27, 2004

Kerry's Corporate Tax Gambit

The car radio tuned to the news yesterday brought the headline, "Presidential Candidate John Kerry proposed today reducing corporate tax rates," and I almost took out a mailbox, a trash can, and a jogger before I reestablished control and got the car firmly back on the road. My first thought: "Gee, John, couldn't wait to hand a big fat issue to Ralph Nader, huh?" But since then I've been cruising the 'net looking for hard facts on just what, exactly, John Kerry proposed, and it's not quite as bad as the radio headline made it sound.

(I incidentally also found the understatement of the week from a Kerry aide, which sort of sums up the problem of putting out a complicated tax idea that's going to be tagged as "cutting corporate responsibility": "When is the last time you saw a Democrat propose a corporate tax cut?" Some of the boys in Kerry's backroom are PROUD of this move. I just hope they don't live to regret it.)

Anyhoo ... what Kerry has proposed is actually a tax TRADE-OFF, to encourage those big companies rushing to get their operations out of the country (in order to cash in on Republican tax schemes) to turn around and come back home with their reinvestments. According to Jim VandeHei in the Washington Post, Kerry is calling "for the elimination of all tax breaks that encourage U.S. companies to locate operations and jobs overseas. For the first time, he will target a popular tax incentive, known as 'deferral,' offered to most U.S. companies that do business in lower-taxed foreign countries.

"To soften the blow to corporations, Kerry will propose a one-time, one-year offer to tax at 10 percent any profits a company brings back to the United States and invests here, an expanded tax credit to companies that create domestic jobs, and a reduction in the corporate tax rate to 33.25 percent from 35 percent -- a 5 percent cut."

Got that? No? Well, it's complicated. Which may be exactly the problem with it. The Bushies have already rushed to label it "a shell game."

And the U.S. Chamber of Commerce turned up its nose: a spokesman said the Kerry plan seems to ignore the complexity of the global economy. "There is a broader point he [Kerry] completely misses: There are companies that open up overseas" for reasons other than tax avoidance, a Chamber spokesman said.

This all appears to be the work of Democratic Leadership Council types, who've infiltrated the Kerry org and are steering it into the Clinton wake of coupling new tax breaks with what amounts to a new tax hike if loopholes are closed. Kerry said this scheme will create some 10 million new jobs in the U.S.

"Under law, most U.S. corporations do not have to pay taxes on their foreign income until they bring it back to the United States. Many defer U.S. taxes by keeping their money overseas and reinvesting it there. Kerry wants to eliminate the incentive for these companies to invest and keep their money in places such as India and Mexico."

Clearly, that radio headline that made me leave the hardtop was calculated to silence the "tax-and-spend liberal" charge, and maybe it'll do that. I just worry about what Nader will do with it too.

Morningstar, Inc. a Chicago "global investment research firm whose mission is to help investors make better decisions to reach their financial goals," reported the Dow Jones not unfavorable take on Kerry's plan, which contained this bit of inside-the-Kerry-camp gossip: "Kerry overrode some of his advisers who opposed the corporate tax cut on political grounds." Read "some of his advisers got elbowed aside by former Clinton economic advisor Gene Sperling," from whence cometh the whiff of DLC-inspired corporate pandering.

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