The proposal that the U.S. join other countries in adopting a territorial tax system is a profoundly bad idea. (Obama’s halfhearted swipe at tax inversions, Sept. 24) First and foremost, the U.S. is not the same as other countries. It is a world power. If it wishes to act and have significant influence beyond its national borders, its citizens – no matter where they reside or incorporate – must pay the price.
The steady erosion of the U.S. tax base is a direct result of the nation having moved to a de facto territorial tax system, where foreign profits are seldom, if ever, taxed. Lawyers and accountants have so gamed its worldwide tax regime that having any tax liability whatsoever is now almost at the discretion of U.S. multinationals and affluent taxpayers.
Adopting an official territorial tax system will only exacerbate tax avoidance. With total impunity, U.S. firms and individuals will be able to escape the U.S. tax system forever, while continuing to benefit from vital American protection of their persons and property around the world.
The notion that a territorial tax system will invite the return and reinvestment of capital in the U.S. rests on the same discredited assumptions that tax cuts create jobs.
Hence, to the contrary, if the U.S. seeks to retain the fiscal strength needed for superpower status, it should move toward extending its worldwide tax system to reach all persons who benefit from its global trade infrastructure, laws, diplomacy and the military around the world.
Lastly, those concerned about America’s decline should look to our friends and allies in Europe to see that a territorial tax system and a country’s status as a former world power may go hand in hand.
David R. Martin,
D.R. Martin, LLC