Conservative Wanderer

“A troubled and afflicted mankind looks to us, pleading for us to keep our rendezvous with destiny; that we will uphold the principles of self-reliance, self-discipline, morality, and, above all, responsible liberty for every individual that we will become that shining city on a hill.” — Ronald Wilson Reagan

Daily Archives: 6 May 2009

Obama’s International Corporate Tax Proposal Explained

Economic guru Keith Hennessey clearly explains the new tax proposed by President Obama:

Let’s look at three factories, each of which produces $100 of income.

  1. Your factory A is in the U.S.  Your corporation pays a 35% U.S. corporate income tax rate ($35).
  2. Your factory B is in China.  Your corporation pays a 15% Chinese corporate income tax rate ($15).  You owe the U.S. government $35 in taxes, minus a credit for the $15 you paid to China.  China gets $15, and the U.S. government gets $20.
  3. Your British competitor’s factory C is also in China.  He pays a 15% Chinese tax rate ($15), and no taxes to his home government.

Factory B shows the effect of a worldwide tax system, in which the firm pays the same total tax wherever the income is earned.  Taxes are based on the nationality of the payor, not the location at which the income is earned.

Factory C shows the effect of a territorial tax system.  Income is taxed only where it is earned.

The U.S. actually has a hybrid.  You can defer the taxes you owe from factory B until you bring that income back to the United States.  This is an advantage relative to a pure worldwide system.

And then, he explains why Obama’s proposal isn’t wise:

Yes, in a territorial system companies can open factories overseas to avoid higher taxation in the U.S.  But the more relevant comparison is whether Intel’s chip fabrication plant in China will be disadvantaged relative to the Malaysian, Brazilian, or French plant in China.  If you are worried about a tax system encouraging U.S. firms to build factories overseas, you should worry that in a worldwide system, entire U.S. firms will move to a country with a territorial system.

A worldwide system fails if most other major economies are using territorial systems, and most are.  Unless you think you can prevent increased globalization, or that you can convince other countries to change to a worldwide system, I think the international competitive pressure is inevitably toward a territorial system.  In a world of increasingly mobile capital, it it both fair and smart for the U.S. to make sure we do not give firms based in other nations an unfair advantage.  I also think that international competition to lower taxes is a good thing.

One wonders if Obama’s chief tax man, Timothy Geithner, really understands the above. Given his excuses regarding his failure to pay his own taxes properly, I have my doubts… if he can’t figure out a 1040, how can he comprehend this sort of thing?

Maybe that’s why the plan coming out of the Obama Administration makes little sense.

Specter: Coleman Should Be Declared the Winner

Has “Benedict Arlen” Specter been taking lessons from Joe Biden? He sat down for a quick interview with the New York Times, and laid this egg (emphasis in original):

With your departure from the Republican Party, there are no more Jewish Republicans in the Senate. Do you care about that?

I sure do. There’s still time for the Minnesota courts to do justice and declare Norm Coleman the winner.

Now, if Specter was still a Republican, I could see him saying that, but not as a Democrat.

He has, of course, come forward with some quick damage-control spin… er… a clarification:

But questioned outside the Senate chamber Tuesday, Specter said the comment was a mistake.

“In the swirl of moving from one caucus to another, I have to get used to my new teammates,” he said. “I’m ordinarily pretty correct in what I say. I’ve made a career of being precise. I conclusively misspoke.”

The big problem with that spin clarification is that the question itself should have reminded him at least once, if not twice (“your departure from the Republican Party” and “no more Jewish Republicans”) that he wasn’t a Republican any more.

So, did Specter not listen closely to the question, not understand the question, or forget between the time the question was asked and when he answered (probably not more than a second or two) that he had switched parties? None of those possibilities puts Specter in a very good light.

Democrats, you’re welcome to him!

Gun Saves College Students

Wonder if this story will be promoted all over the leftymedia the same way an out-of-control gunman would be (and has been many times in the past):

“Apparently, his intent was to rape and murder us all,” said student Charles Bailey.

Bailey said he thought it was the end of his life and the lives of the 10 people inside his apartment for a birthday party after two masked men with guns burst in through a patio door.

“They just came in and separated the men from the women and said, ‘Give me your wallets and cell phones,’” said George Williams of the College Park Police Department.

Bailey said the gunmen started counting bullets. “The other guy asked how many (bullets) he had. He said he had enough,” said Bailey.

That’s when one student grabbed a gun out of a backpack and shot at the invader who was watching the men. The gunman ran out of the apartment.

The student then ran to the room where the second gunman, identified by police as 23-year-old Calvin Lavant, was holding the women.

“Apparently the guy was getting ready to rape his girlfriend. So he told the girls to get down and he started shooting. The guy jumped out of the window,” said Bailey.

I imagine those would-be rape victims are glad that student had a gun handy.