Punishing business won't fix problem

Punishing business won't fix problem

January 26th, 2009 in Opinion Free Press

The urge to "soak the rich" can sometimes override common sense.

A report by the Government Accountability Office says most of the 100 biggest corporations in the United States have subsidiaries in countries with very low taxes. While there are many reasons a company may have overseas businesses, some undoubtedly use the subsidiaries to shield earnings from taxation.

That angers some lawmakers, including Sen. Byron Dorgan, D-N.D. In an Associated Press article on the report, he went so far as to call some companies that used offshore tax havens "tax dodgers." But news accounts did not claim that the companies had illegally evaded their tax liabilities. Apparently, they simply sought to minimize their taxes - just as individuals use legal exemptions and deductions to reduce their tax bills.

Also troubling to critics is the fact that some American companies that have saved tax dollars by having subsidiaries in low-tax countries have gotten federal bailout money.

We are not fond of bailouts, but we have to wonder what the critics would have the companies do. If Congress suddenly forbids foreign tax shelters and a corporation's tax burden grows by millions of dollars, that clearly would not reduce its need for a bailout. To the contrary, it would be in even worse financial condition and crying out for more help.

High U.S. taxes are why corporations try to shelter income in the first place. Punishing them with still higher taxes will not help them create jobs or grow our economy.

That doesn't mean the complex U.S. tax code shouldn't be simplified. It should. But so long as companies are using legal means to reduce their tax bills, it's hard to blame them.