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Continuing the Conversation: Tax Reform for American Jobs

Yesterday, even before we posted here on the blog about the President's proposals to curb offshore tax havens and end tax incentives for companies shifting jobs overseas, we asked for your reactions on our various social networking outposts. As we expected, there were a lot of interesting comments and questions, largely supporting the President but some raising concerns and objections. We asked Jason Furman, Deputy Director of the National Economic Council, to address some of them:
kylekunkler:Ending deferral (when US already has 2nd highest corporate tax) will only hurt US MNCs and cost jobs!
Jason Furman: Kyle, you are correct that the United States has the second highest statutory tax rate in the world, the official rate published in the tax code. But the United States also has more loopholes and special tax preferences than many other countries. As a result, the United States has a much lower effective tax rate. If you look at corporate taxes as a share of GDP they are below those of most major economies. The result is a tax code that is complicated, inefficient and unfair. One of major causes of these problems is the way that we tax – or more often do not tax – the foreign earnings of American companies. The administration’s plan is intended as a major, first step in addressing this problem.
ScottGjerdingen: What sort of jobs would be impacted by Obama's "offshore jobs" corporate cutback on tax benefits?
Jason Furman: Scott, you ask an important question of what jobs would be affected by the President’s proposal. In answering it is important to look at both halves of the proposal. One half is to end special tax preferences for creating jobs overseas. The goal of this is not to stop American companies from competing and succeeding in the global economy. What the President wants is to stop giving them special subsidies for doing so – subsidies they would not get for investing in the United States. The result will be to shift more investment and job creation to the United States. The second half of the policy is to take these savings and use them to cut taxes in businesses that create jobs in the United States by making the tax credit for research & development permanent. The direct beneficiaries of this policy will be companies engaged in research and development, but the innovations that result will have important spillover effects, creating jobs and raising wages across the economy.
Marc Solomon: Bringing jobs back to the US by switching tax incentives from creating jobs overseas to creating jobs in the US is a wonderful idea. My concern is, if the goal is to make our tax laws fairer and simpler, this accomplishes only the first and not the second (and of course that assumes fairer means fairer for US citizens and not for all people of the ... Read Moreworld). Wouldn't just removing the tax incentives for creating jobs overseas accomplish BOTH goals and not just the one? It would definitely simplify the tax laws and be fair for all people, not just U.S. citizens (although, personally, I am prejudiced to being fairer for U.S. citizens).
Jason Furman: Marc, you should understand that today’s announcement is a down-payment on the President’s overall tax agenda. As he said in his remarks today, "the steps I am announcing today will help us deal with some of the most egregious examples of what's wrong with our tax code and will help us strengthen some of these other efforts.  It's a down payment on the larger tax reform we need to make our tax system simpler and fairer and more efficient for individuals and corporations." That said, the proposals the President made today would start to simplify the tax code. This includes the President’s proposal to reward companies that create jobs in America – which would make the research and development tax credit permanent, adding more predictability and stability to the tax code because companies would no longer have to worry about whether or not the credit would expire or continue.