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US174 - Territorial Tax System
| Switch to a territorial tax system | |
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Description
Source: mittromney.com
Arguments
As proposed in the President’s National Commission on Fiscal Responsibility and Reform, we should bring the U.S. system more in line with our international trading partners. To do so, we must change the way we tax foreign-source income by moving to a territorial system. Under such a system, taxes are only collected in the country in which business is actually conducted.
Source: lindasplan.com
Source: lindasplan.com
Counterarguments
Under a so-called territorial tax system, overseas profits of American corporations would escape United States taxation altogether. That would be a big incentive for multinational companies to shift jobs and investments overseas. It would also be a huge giveaway to multinationals – which, not surprisingly, are supporters of the switch to a territorial code.
Under current law, taxes on foreign profits of American firms are deferred until the companies repatriate the money to the United States. Upon repatriation, the profits are taxed, but with a credit given for any foreign taxes paid on the profits, so there is no double taxation. That is already more than generous tax treatment. But a territorial system would go one better, by declaring that overseas profits that are currently tax-deferred would instead be tax-free, forever.
Under current law, taxes on foreign profits of American firms are deferred until the companies repatriate the money to the United States. Upon repatriation, the profits are taxed, but with a credit given for any foreign taxes paid on the profits, so there is no double taxation. That is already more than generous tax treatment. But a territorial system would go one better, by declaring that overseas profits that are currently tax-deferred would instead be tax-free, forever.
Source: nytimes.com
The territorial tax would create 800,000 jobs - all of them outside America!
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