A Fairer System for Taxing U.S. Corporate Dividends

 The Wall Street Journal, Dec. 7, 2011 (Letter to the Editor). 

Regarding your editorial “American the Difficult” (Nov. 28, 2011):   None of the three jurisdictions that you commend for the flatter and lower business taxes—Hong Kong, Singapore and Ireland—is a world power.

As a matter of individual profit maximization, lower-tax jurisdictions may be attractive to businesses seeking to escape taxes back home. But how much protection do these tiny countries provide for companies faced with expropriation, breach of their contracts, criminal prosecutions of their executives and infringement of their intellectual property? How valuable is a Hong Kong patent? A Singaporean trademark? Or an Irish copyright? How influential are their diplomats or their military?

Where would Google, Apple and Oracle be without the force of U.S. copyrights to protect their software?  How could Exxon and Chevron get along without U.S. patent protection or the U.S. armed forces that guard trade routes for tankers carrying their oil?

Through various ruses, these companies end up paying almost no U.S. taxes on the income they produce with “offshore assets” that derive their value mostly from U.S. protection.  A swift end should be brought to this tax dodge that is draining the U.S. of its ability to maintain its superpower status.

We are simply not collecting enough from American-protected businesses operating abroad.  There is even talk about abandoning the U.S. world-wide tax system and emulating the territorial tax systems of secondary countries.  If we do so, America will become a second-tier country.

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