Obama and his economic team's rhetoric is not helping with Congress
President Obama's mortgage "cramdown" proposal, always a flawed idea, will not be approved as 39 Republican senators were joined by 12 Democrats to turn down the idea. While superficially it was attractive to many as a way to put pressure on banks to aggressively restructure loans, the plan had the potential to be an operational catastrophe and in all probability would have damaged any revival in good straight up securitization markets that we need to get back on track. Just an opinion, but it's likely that more than those 51 senators were relieved to see the bill defeated and happy not to stick their necks out to get it done.
Today there is word that Obama may face the same type of bipartisan opposition to his plan to tax U.S. corporations in all foreign jurisdications. There are constructive aspects to this plan but it is too broadly focused, and his delivery of the message all wrong, saying major U.S. corporations have been engaging in a "tax scam". A few always may be, but most of these major companies have just been playing by the rules that were in place. What a poor choice of words in trying to corral the votes of Senators in whose states some of these powerful multinationals are headquartered. Also, the suggestion that multinational corporations' incentive to produce goods in other countries is primarily tax driven, as opposed to being closer to their customers and, for non-G7 countries, cheaper labor is off the mark as well.
A plan that would regulate the passage of corporate money into or through tax havens like the Cayman Islands, the Channel Islands and others makes sense. That is to store and protect it, not to use it productively. Here's the other side of the coin. When Coke cans and distributes Coke products in Europe with European employees and for European customers, or Proctor and Gamble makes toothpaste in Asia for those markets, or GM builds Buicks in China for the Chinese, or Citibank provides full branch systems and consumer banking services in southeast Asia, do they get no relief from U.S.taxes.
There may be ways that the tax system has been exploited by U.S. multinationals, but there was a defensible reason for the existing rules to be in place.
Today there is word that Obama may face the same type of bipartisan opposition to his plan to tax U.S. corporations in all foreign jurisdications. There are constructive aspects to this plan but it is too broadly focused, and his delivery of the message all wrong, saying major U.S. corporations have been engaging in a "tax scam". A few always may be, but most of these major companies have just been playing by the rules that were in place. What a poor choice of words in trying to corral the votes of Senators in whose states some of these powerful multinationals are headquartered. Also, the suggestion that multinational corporations' incentive to produce goods in other countries is primarily tax driven, as opposed to being closer to their customers and, for non-G7 countries, cheaper labor is off the mark as well.
A plan that would regulate the passage of corporate money into or through tax havens like the Cayman Islands, the Channel Islands and others makes sense. That is to store and protect it, not to use it productively. Here's the other side of the coin. When Coke cans and distributes Coke products in Europe with European employees and for European customers, or Proctor and Gamble makes toothpaste in Asia for those markets, or GM builds Buicks in China for the Chinese, or Citibank provides full branch systems and consumer banking services in southeast Asia, do they get no relief from U.S.taxes.
There may be ways that the tax system has been exploited by U.S. multinationals, but there was a defensible reason for the existing rules to be in place.
posted by John Borden at 5:41 PM
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