Wednesday, June 27, 2012

Offshoring and international taxation

The Obama campaign has recently been running ads in battleground states dubbing Romney the "Outsourcer in Chief," based on a recent Washington Post article that associated Bain with the strategy of replacing American workers with low-wage people in places such as China and India.  There is some evidence that this line of attack is quite effective.

I wonder if the focus on outsourcing has implications for the terms of U.S. international tax policy debate.  One of the common arguments for strengthening worldwide taxation of U.S. companies, rather than moving towards exemption, is that this would discourage them from relocating factories abroad.  While the Obama Administration has been at times on both sides of this debate - offering pro-worldwide budget proposals but expressing conditional sympathy with a shift towards exemption - there might be a political logic to coming down more heavily on the pro-worldwide side.  This would permit them to draw a stronger contrast with Romney on real world policy issues, and to back up the "Outsourcer in Chief" claim with an eye to the future not just the past.

Such a move in the presidential campaign would tend to strengthen the longstanding stalemate in U.S. international tax policy debate, relative to the prospect that we will shift  to exemption, unless the Republicans win across-the-board in 2012 (in which case what the Democrats think or say might simply not matter).

Just to be clear, all this is speculation about the politics of U.S. international taxation, not my own assessment of how we ought to analyze the substance.

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