U.S. tax on corporate revenue earned abroad is deferred: Good going

By Money Matters Editors

The Obama administration has shelved plans to increase taxes on multinational corporations by more than $200 billion, The Wall Street Journal reported Tuesday, after businesses complained the taxes would decrease commercial activity and hurt the creation of jobs.

And to the above, the Editors of Money Matters say: smart move! Businesses will have a hard enough time both retaining existing employees and adjusting to the new, likely requirements under the upcoming heath care reform legislation. Outside of health care reform – which also has the potential to lower corporate health care premiums, long-term, if competition increases - this is no time to add to business mandates: their operational models are being stressed enough by the recession.

One tax exemption that has been extended, but that the Obama administration may re-visit next year: the deferral on paying taxes on revenue earned abroad, The Journal reported. Critics say the law encourages U.S. companies to avoid paying U.S. taxes by expanding operations overseas. Companies contend the deferral allows them to compete globally.

Further, the Obama administration’s willingness to delay the tax is another example of President Obama’s centrist, open-door, cross-ideology approach to governance and policy. Contrary to some on the right, Obama time and again has shown himself to be a pragmatist whose not wedded to either liberal ideas or conservative ideas: he chooses a left-of-center solution here, if it works; then a right-of-center solution there, if that works.

A classic example, in addition to the corporate tax exemption, is the issue of the public option in health care reform. Obama has never made it a requirement, and has often stated if the Congressional votes aren’t there, he doesn’t want the public option to jeopardize the 10 other goals he wants health care reform to achieve.

Now, what business executives and Obama administration officials should do is sit down and agree on investment tax credit policies that will create jobs in the United States. We’re not talking about job subsidies: we’re talking about incentives to invest in and access an American strength: its high-productivity, skilled work force. Investment credits will help put the great American job creation machine in motion again.