How Will Reducing U.S. Taxes on Foreign Operations to Zero "Lure" Companies to Bring Jobs Back to the U.S.?

November 01, 2017

The Washington Post told readers that the Republican tax plan:

“…will aim to slash corporate tax rates, simplify taxes for individuals and families and lure the foreign operations of multinational firms back to the United States with incentives and penalties.”

While there is no plan at the moment, the reports to date have said the Republicans want to shift to a territorial tax under which companies don’t pay U.S. tax on their foreign profits. If this is true, their proposal will increase the incentive to shift operations overseas, or at least to have their profits appear to come from overseas operations.

It is worth noting that the concern expressed about future deficits in this piece is referring to a largely meaningless concept. If we are concerned about the commitment to future debt service payments then we should be looking at debt service payments, which are now near historic lows relative to the size of the economy.

We should also be asking about the burden the government creates by granting patent and copyright monopolies. This presently comes to close to $370 billion annually (more than twice the debt service burden) in the case of prescription drugs alone. This is the gap between what we pay for drugs, currently around $450 billion a year, and the price that would exist in a free market without patents and related protections, which would likely be less than $80 billion. The full cost of these protections in all areas is almost certainly at least twice the cost incurred in prescription drugs.

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