The Facts on Rubioâs Econ Speech
This afternoon, Senator Marco Rubio delivered a speech laying out his economic plan. The plan consists of a host of failed and recycled GOP ideas including a tax proposal Mitt Romney ran on that could allow corporations investing overseas to avoid paying US taxes.
One of Senator Rubioâs new ideas is a policy straight from Mitt Romney â incentivize companies to create jobs overseas while avoiding US taxes. We had that debate in 2012 and Americans agreed with Democrats that we need to invest in jobs here at home, not create incentives for corporations to create jobs elsewhere.
In 2014 voters have a clear choice between Republicans who want to expand opportunity for a few and Democrats who are committed to expanding opportunity for all. Senator Rubio couldnât have made that choice clearer.â
Here are the facts on Rubio's plan:
ROMNEY PLAN: SWITCH TO A TERRITORIAL TAX SYSTEM
Romneyâs Plan Called For Switching The United States To A âTerritorialâ Tax System. âThe United States currently operates under what is known as a âworldwideâ tax system, meaning that business income is taxed at the U.S. rate regardless of whether the income is earned within American borders or overseas⌠It needs to be changed. Other nations have noted the competitive disadvantage inherent in a worldwide tax system, resulting in a gradual movement of countries converting from a worldwide to a âterritorialâ system, in which income is taxed only in the country where it is earned⌠Romney supports the recommendation of the Bowles-Simpson Commission to make the switch to a territorial system.â [Romneyâs âBelieve In Americaâ Jobs Plan, Page 45-46, released 9/6/11]
A TERRITORIAL TAX SYSTEM WOULD GIVE TAX CUTS TO CORPORATIONS THAT MOVE THEIR PROFITS AND INVESTMENTS OFFSHORE
A Territorial Tax System Would Give Tax Cuts To Corporations That Move Their Profits And Investments Offshore. âA territorial tax system would provide tax cuts to large U.S.-based multinational corporations, particularly those that can most aggressively move their profits and investments offshore.â [CBPP, 1/31/13]
A Territorial System Would Create An Incentive For U.S.-Based Multinationals To Invest More Of Their Capital Offshore. âSeparate and apart from such profit-shifting, a territorial system also would create an incentive for U.S.-based multinationals to invest more of their capital offshore. Thatâs because the profits would face little or no U.S. taxes and, in many places, a relatively low tax rate in a foreign country â reducing the after-tax cost of a corporationâs offshore production.â [CBPP, 1/31/13]
A Territorial System Would Give U.S.-Based Multinationals More Incentive To Book Their Profits In Tax Havens And Low-Tax Countries. âA very low or zero U.S. tax rate on foreign profits â as a territorial system would provide (see Table 1) â would give U.S.-based multinationals more incentive to book their profits in tax havens and low-tax countries.â [CBPP, 1/31/13]
A TERRITORIAL TAX SYSTEM COULD ENTICE COMPANIES TO CREATE AN ESTIMATED 800,000 JOBS OVERSEAS AND COULD DISPLACE AMERICAN JOBS
Economist Kim Clausing: Under A Territorial Tax System âThe Tax Incentive To Locate Jobs In Low-Tax Countries Would Increase Significantlyâ Which âWould Increase Employment In Low-Tax Countries By About 800,000 Jobs.â âWhat would the effects be if the United States shifted to a pure territorial system? ⌠it would encourage job creation abroad instead of at home. Based on my research and that of other experts in international taxation, it is possible to estimate how many jobs are at stake in this debate. In 2008 U.S. multinational firms employed 10 million workers in affiliated firms abroad. Under a pure territorial tax system, the tax incentive to locate jobs in low-tax countries would increase significantly, which I calculate would increase employment in low-tax countries by about 800,000 jobs.â [Kimberly A. Clausing, A Challenging Time for International Tax Policy, Tax Notes, 7/16/12]
Economist Kim Clausing: Under A Territorial Tax System, The 800,000 Jobs Created Overseas âCould Displace Jobs At Home.â âUnder a pure territorial tax system, the tax incentive to locate jobs in low-tax countries would increase significantly, which I calculate would increase employment in low-tax countries by about 800,000 jobs⌠If U.S. unemployment rates are low, jobs abroad need not displace jobs at home, although the composition of jobs may change (and multinational corporate jobs are often good, high-wage jobs). In this economy, however, those new, low-tax-country jobs could displace jobs at home.â [Kimberly A. Clausing, A Challenging Time for International Tax Policy, Tax Notes, 7/16/12]
A TERRITORIAL TAX SYSTEM COULD WEAKEN THE ECONOMY AND CAUSE WAGES TO FALL
CBPP On A Territorial Tax System: âAmong The Risks, Real U.S. Wages Could Fall, Federal Budget Deficits Could Rise, And Tax Burdens On Domestic Companies Could Increase.â [CBPP, 1/31/13]
CBPP: A Territorial Tax System Would Be âIll Advisedâ Creating âSerious Economic And Fiscal Risksâ And âWould Risk Hurting Domestic Businesses, Boosting Deficits Over The Long Run, And Weakening The Economy.â âUnfortunately, one proposal that has received significant attention would take the tax code in an ill-advised direction, creating serious economic and fiscal risks. The proposal â to create a so-called âterritorialâ tax system â would create greater tax incentives for multinational corporations to invest and move profits overseas rather than in the United States, which would risk hurting domestic businesses, boosting deficits over the long run, and weakening the economy.â [CBPP, 1/31/13]
A Territorial System Would Risk Reducing Wages For U.S. Workers. âSecond, by encouraging capital to flow overseas, a territorial system would risk reducing wages at home.â [CBPP, 1/31/13]
Reuters: âA Territorial System Would Prompt U.S. Companies To Shift Offshore Even More Income Than They Already Do And Jobs Would Follow, Worsening Unemployment And The Economy, Critics Say.â [Reuters, 9/14/11]
A TERRITORIAL TAX SYSTEM COULD ENABLE CORPORATIONS TO AVOID PAYING TAXES AND INCREASE THE DEFICIT BY ROUGHLY $130 BILLION
A Territorial Tax System Could Enable Corporations To Avoid Paying Taxes Altogether. âA territorial regime would magnify the incentive to shift profits overseas to low-tax jurisdictions because doing so would not just delay U.S. corporate taxpaying but enable corporations to largely avoid it altogether.â [CBPP, 1/31/13]
A Territorial Tax System Could Increase The Deficit And Cost Roughly $130 Billion In Revenues Over Ten Years. âA territorial tax system would likely increase the budget deficit in two ways: U.S.-based multinationals would pay little or no tax on their foreign profits. A territorial tax system would encourage such firms to shift profits overseas that they would otherwise report in the United States and pay U.S. tax on, either by actually moving investments offshore or by changing on paper where they report the profits. As noted above, the Treasury Department estimates that a simplified territorial system â one that doesnât include strong rules to mitigate these revenue losses â could cost roughly $130 billion in lost revenues over ten years.â [CBPP, 1/31/13]
