Since the days of the Kennedy administration, U.S. multinational companies have been very successful in deferring taxation by shifting profits offshore. The in Internal Revenue Code permits such deferral of taxation so long as you can legitimately take the position that a portion, or maybe even all, of your worldwide profits are earned outside of the U.S. So long as the cash remains outside of the U.S., the profits are not taxable in the U.S. Granted, the company may have to pay foreign taxes on the profits, but foreign tax rates tend to be lower than U.S. tax rates, sometimes much lower, giving U.S. companies great opportunities to save taxes and have low effective tax rates.
So what’s the problem with that? The problem is that companies cheap nfl jerseys are incentivized to shift profits overseas, meaning shifting operations, jobs, etc. outside of the U.S. Furthermore, companies are incented to keep cash overseas, because once that cash is brought back into the U.S., the foreign profits become subject to U.S. taxation. Today it is estimated that U.S. Fortune 500 companies are holding $2.4 not trillion overseas. Wouldn’t cheap jerseys it be nice to bring some of that cash back to the U.S.? A large influx of cash would likely boost the U.S. economy, create jobs in the U.S., pay for infrastructure improvements etc.
There’s a Democratic Senator named Ron Wyden who is hell bent on accomplishing just that. Currently, the Republicans are in control of the Senate, but that could change come the November elections. If the Democrats take control, Wyden believes the days of tax deferral are numbered. Although a Democrat, Wyden often sides with the Republican party on tax proposals. Wyden voted to abolish the estate tax, lower tax rates on capital gains, and encourage the study of a flat tax.
Although Wyden often sides with the Republicans on tax issues, his decision to hire far-left University of San Diego law professor, Victor Fleischer, wholesale jerseys as co-chief tax counsel of the Senate Finance Committee has come under scrutiny. Fleischer made the term “carried interest” famous in an academic paper written in 2006. If Democrats gain control come November, Fleischer is anticipated to have a key role in shaping the mlb direction of tax reform discussions. Unlike Wyden, Fleischer is known to have strong ideological views that are completely at odds with the Republican view on taxes. Thus, it is argued that a man like Fleischer will be unable to achieve true bipartisanship agreement within the U.S. Congress, and tax reform may be further delayed.
In contrast to the U.S. deferral Dealer system, most countries use a “territorial” system, whereby taxes are paid to the countries where the profits are earned, and are not taxed again upon repatriation. Paul Ryan, the Republican Speaker of the House, and others in his caucus are in favor of such a system in the U.S., which would effectively replace the current deferral system. But, so long as a Democrat remains President, it is unlikely season that the U.S. would adopt such a territorial system. And so, we may be stuck with the current, inefficient deferral system for quite some time.