Saturday, September 8, 2012

Joe Biden's Territorial Tax Claim Based On Controversial Study

http://www.huffingtonpost.com/2012/09/07/joe-biden-territorial-tax_n_1865287.html?ir=Business

Joe Biden made a lot of claims about Mitt Romney and the Republican presidential nominee's policies during his fiery speech at the Democratic National Convention Thursday night, but one of them may have been a bit overblown.

Biden slammed Romney's proposal to overhaul the system for taxing corporations' overseas profits. Under current U.S. tax laws, companies are responsible for paying taxes on the profits they earn abroad; they get credits for paying foreign taxes on their profits and don't have to pay U.S. taxes until they bring the money home. But under Romney's proposal, according to Bloomberg, companies wouldn't owe much to the U.S. government in taxes on what they make overseas.

Biden said of Romney's proposal Thursday night:

Governor Romney believes in this global economy it doesn't matter much where American companies invest and put their money or where they create jobs. As a matter of fact, in his budget proposal, in his tax proposal, he calls for a new tax. It's called a territorial tax, which the experts have looked at, and they acknowledge it will create 800,000 new jobs -- all of them overseas, all of them.

The only problem: Biden's 800,000 jobs claim makes a lot of assumptions based on just one study. According to Bloomberg, the findings come from a July study by Reed professor Kimberly Clausing, who offered an analysis of a pure territorial tax system, or one in which companies would pay no U.S. taxes on the profits they make overseas. It's unclear if Romney's plan would entirely eliminate U.S. taxes on overseas profits.

In addition, Clausing's study assumes the U.S. corporate tax rate -- which at 35 percent is relatively high, compared to that of other countries -- would stay about the same under a territorial tax system, pushing companies to make their money overseas, where corporate tax rates have been on the decline since 2008.

President Obama has called for lowering that tax rate to 28 percent, while Mitt Romney wants it cut to 25 percent.

After Clausing released her study in July, conservative outlets pounced, noting that she had donated to President Obama's reelection campaign.

As it turns out, some Obama advisers think a territorial tax would be a good idea. Business leaders on Obama's Export Council and on his Council on Jobs and Competitiveness have supported the idea of a territorial tax in the past, according to ABC News' Jake Tapper. And it seems to be working for other countries; 25 out of the 34 countries in the Organisation of Economic Cooperation and Development use a territorial tax system.

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