Driving may make you stupid as Otto in Repo Man says but it’s got nothing on television. I was forcibly reminded of this when in a fit of boredom last night I clicked on the old Sony. Lesley Stahl’s report on US corporate tax cheats greeted me. Having heard and on occasion observed that “60 Minutes” can be a rare refuge from corporate speak, I watched for a few minutes. To my disappointment but not surprise, Stahl spoke only to top managers of multinationals and corporate accountants. These mouthpieces for big-money repeatedly criticized high US corporate taxes for the decisions of so many highly profitable companies to relocate headquarters overseas for the sole purpose of avoiding the IRS.
There was a lot of hand-wringing about the shiny new corporate offices in Ireland where corporate tax rates are negligible with the clear implication that America should emulate Ireland’s tax structure. Stahl did not see fit to mention Ireland’s enormous budget deficit or her recent bank crises. Likewise, Stahl did not discuss with social workers, teachers, or other public employees the damage that clever accountants have wrought as they have cheated Americans out of billions of dollars in tax revenues.
In addition, Stahl did not interview any unbiased tax experts, labor leaders, or small businesspeople for their thoughts on how to recapture our nation’s wealth. Frankly she didn’t need to. The legislative response to the shell game operators, con artists, and grand thieves is so breathtakingly obvious that you don’t need a high school education – much less an advanced degree or special expertise – to understand it. Quite simply, foreign entities should only be permitted to do business in the United States through an American-incorporated subsidiary which must file on April 15 a tax return covering all and only revenues generated and costs incurred in this country.
Certainly, there are some additional issues that would arise if we incorporated this change in American tax laws which currently allow multinational companies to report income generated in one country with high corporate taxes and strict law enforcement in a second country where rates are low and enforcement lax. The biggest might well be the use of excessive cost bases to reduce on paper the American subsidary’s profits on goods manufactured overseas and sold in the United States. To prevent this practice, high tariffs should be imposed on foreign-manufactured goods. When the American subsidiary files a tax return, it should have to demonstrate that it paid tariffs on all imported goods and services. The more the American subsidiary spends on foreign goods and services, the more it will have to document it paid in tariffs to the Federal Trade Commission. Indeed, the tariff rate should be higher than the income tax rate to stimulate our manufacturing and service sectors. Regardless of whether the subsidiary is paying the United States Treasury via taxes or tariffs or a combination of the two, Americans will be fairly compensated for allowing companies the privilege of doing business and profiting from it in our country.