Then, Republican plans for changes in business taxes will not create more U.S. jobs. The plans of several Republican presidential candidates and congressional leaders would shift businesses to what is called a "territorial" tax system. That means corporations would be taxed only on the profits they earn inside the United States, and be taxed by other governments where they also do business.
We should do exactly the opposite. We should reduce or eliminate taxes on businesses that employ Americans producing goods and services inside our own country, while increasing taxes on the profits that corporations earn by outsourcing or manufacturing overseas. Above all, we should eliminate the foreign tax credit, a self-destructive provision that allows corporations to pay China or Venezuela or Saudi Arabia the money they would otherwise owe the U.S. government. Let's also cut out the deductions that U.S. corporations take for hiring foreigners to do work that Americans can do.
Those who support a territorial business tax argue that it will encourage multinational corporations to bring home the profits they earn overseas. But that's not going to happen so long as it remains more profitable for them to invest and manufacture in cheap-labor countries.
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