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Friday, September 7, 2012

Biden Mischaracterizes Clausing Study in Claim That Romney's Territorial Tax Plan Would 'Create 800,000 Jobs, All of Them Overseas'

Bloomberg, Reality Check: Biden Misleads on Impact of Romney’s Tax Plan:

The Claim: Biden said in his prepared remarks that Republican presidential candidate Mitt Romney “has a new tax proposal -- the territorial tax -- that experts say will create 800,000 jobs, all of them overseas.”

The Background: Romney has proposed changing the basic principles of the U.S. international tax system. Under current law, companies owe U.S. taxes on the profits they earn around the world. They receive tax credits for payments to foreign governments and don’t have to pay U.S. taxes until they bring the money home. U.S.-based companies with substantial overseas operations keep profits overseas to avoid taxation here. Romney wants the U.S. to adopt a territorial tax system under which companies would owe little or no taxes on their overseas income.

The Facts: Biden overstated the case. His 800,000 jobs number is based on a study conducted by one expert, Kimberly Clausing, an economics professor at Reed College in Portland, Oregon. Her July analysis [A Challenging Time for International Tax Policy, 136 Tax Notes 281 (July 16, 2012)] examined the effects of a “pure” territorial system under which U.S. companies would face no domestic taxes on their foreign income. ...Clausing’s study doesn’t say that no jobs would be created in the U.S. Instead, it says that a pure territorial tax plan would increase employment by U.S. companies in low-tax countries.

Biden's claim apparently is based on this paragraph from the article:

Based on my research and that of other experts in international taxation, it is possible to estimate how many jobs are at stake in this debate. In 2008 U.S. multinational firms employed 10 million workers in affiliated firms abroad. Under a pure territorial tax system, the tax incentive to locate jobs in low-tax countries would increase significantly, which I calculate would increase employment in low-tax countries by about 800,000 jobs.

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Comments

In other words, the territorial tax will create 800,000 jobs, all of them overseas.

Posted by: Bob | Sep 7, 2012 4:02:57 PM

So this is a mischaracterization because it relies on an expert instead of experts? Seems pretty thin to me...

Posted by: Anonymous | Sep 7, 2012 7:39:25 PM

Does anyone know if Romney is going for a pure territorial tax system? No Subpart F? Any details on potential transfer pricing rules? My guess is there are no details on his plan anywhere.

Posted by: HTA | Sep 7, 2012 8:21:55 PM

That headline is from Newsmax, not from Bloomberg.

Posted by: seth | Sep 7, 2012 8:43:27 PM