Obama's Budget: Beware the "Berlin Wall" tax

President Obama prepares to propose 2016 budget to Congress

Budget calls for $478 billion for defense

President Obama has proposed in his new budget to immediately seize 14% of the accumulated overseas profits of American companies. And his budget proposes to impose a new 19% tax on any future overseas earnings of those American companies. Obama proposes to use that money to finance a new national infrastructure program for roads and bridges.

It is just a matter of paperwork for any American company with overseas business anywhere to become an Irish company with overseas business in America.

The fundamental problem with that proposal is that it is just a matter of paperwork for any American company with overseas business anywhere to become an Irish company with overseas business in America. American companies already pay taxes on overseas earnings in the countries where that money is earned. So Obama is proposing a punitive, double tax on those earnings.

It is just a matter of paperwork for any American company with overseas business anywhere to become an Irish company with overseas business in America.

If that was your company, you would reincorporate in Ireland too. Or merge with an Irish company.

Ireland maintains the lowest corporate tax rate in the world, at 12.5%. America still maintains an outdated top marginal corporate tax rate of 35%, nearly 40% with state corporate tax rates on average, the highest marginal corporate tax rate in the world.

Under Obama’s proposed new tax, major American companies would start to flee America, reincorporating or merging with foreign companies to become non-American, to stop the tax thievery. The U.S. government would then have to respond with new, punishing, tax penalties to stop that. This has all already begun to happen under current law, even before Obama’s new proposed tax.

The resulting, growing chaos would not be good for the American economy, or the middle class or working people.

With this new cloud over whether the American government will let any money invested in the country out of the country, the result would be a sharp decline of all investment in America, from all sources, domestic and foreign.

Why invest still more money here, when the government will not allow it to participate in international business under competitive tax burdens? Such capital investment is the foundation of new jobs, and rising wages.

This is all analogous to what happens any time the dark clouds of Marxism descend over any country. People and capital start to flee. That is why the Berlin Wall was erected when the former East Germany was under Communist control.

That is why I call Obama’s new proposed tax, “the Berlin Wall tax.”