In this year's budget proposal, President Obama recommends that the U.S. tax earnings generated abroad to help pay for his infrastructure proposal.
It sounds interesting, but it probably will not work well in the long run.
The president hopes to generate nearly $300 billion by taxing the accumulated retained earnings overseas of $2 trillion at a 14 percent rate to pay for more than half of the six-year infrastructure project costing nearly $500 billion. Future foreign earnings by U.S. companies would be taxed at a minimum rate of 19 percent.
These U.S. companies would pay two sets of taxes on the earnings realized overseas: once by the foreign country where they were earned and again by the U.S. where they were not.
My tax plan
would eliminate this double taxation and institute a much lower tax rate of approximately 2 percent on profits, thereby attracting greater net capital inflows and more tax revenue to balance the budget at current spending levels.
Approximately $25 trillion in U.S. assets are invested abroad, while $31 trillion of foreign assets are invested in America, representing a net international investment deficit of $6 trillion, a four-fold increase from $1.5 trillion in 2008, according to the Bureau of Economic Analysis.
It seems these assets should be taxed based on the jurisdiction they are invested in, and not by more than one sovereign entity. This would provide tremendous incentive for countries to offer an attractive tax climate to increase capital appeal.
My proposal would balance the budget, increase employment, raise investment, generate economic growth and maintain purchasing power while providing a stronger safety net to those falling on hard times.
It's time we completely rethink how we raise revenue to pay our bills.
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