Nobody Likes Paying Too Much | Richard W. Rahn | Cato Institute: Commentary

Nobody Likes Paying Too Much | Richard W. Rahn | Cato Institute: Commentary: "Other things being equal, would you start a new business in a higher- or lower-tax jurisdiction, and would you prefer to live and invest in a higher- or lower-tax locale? This is not a tough question for most people, but the powers in Washington (the administration and the congressional Democratic leaders) are incensed that the American people are answering the question in a most politically incorrect way by opting out of high-tax place"

"If a U.S. business operating globally has to pay a 35 percent (U.S.) corporate tax rate (the second-highest in the world) plus state corporate taxes while its international competitors pay much lower rates, the U.S. company will be at a competitive disadvantage. Rather than provide necessary tax relief, the new Treasury proposals, if enacted, will give American multinational companies two basic choices for the long run — move the company outside the United States to a more tax-friendly jurisdiction, or go out of business and fire the workers."

"You may not be aware that foreign citizens who invest in stocks and bonds in the United States do not have to pay U.S. income tax on the interest, dividends and capital gains from those investments. This is good economic policy for the United States because it attracts necessary foreign investment. Without foreign investment, the United States would have far less capital to invest in research and development, new plants and equipment, and job creation; also, the government would have a much more difficult time financing the federal deficit.

Some U.S. citizens have been trying to get in on the good deal the United States offers foreigners by investing in the U.S. through foreign institutions. In order to close this loophole, the Treasury and Congress are proposing regulations of mind-boggling complexity that are likely to drive many foreign investors out of the U.S. market, thus causing Treasury to lose, rather than gain, revenue.

Perhaps if we treated U.S. citizens as well as we treat foreign investors by removing the double tax from interest, dividends and capital gains, the markets would boom, businesses would expand, millions of new jobs would be created and, consequently, more taxable income likely would be created, rather than less."