Election Disadvantage
Economy – Foreign Tax Exemption 2NC
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- Economy – Tax Cuts 2NC
Economy – Foreign Tax Exemption 2NCRomney’s tax exemption policy hurts domestic economy dramaticallyHanlon 12 (Seth Hanlon, director of Fiscal Reform at American Progress, 7.16.12, Center for American Progress Action Fund, “Romney’s New Tax Incentive for Outsourcing U.S. Jobs,” http://www.americanprogressaction.org/issues/2012/07/hanlon_outsourcing.html) The unfortunate consequence is that our tax system’s skewed incentives “encourage firms to locate physical assets, production, and jobs in [low-tax foreign] countries,” according to the nonpartisan Tax Policy Center. Worse, our existing system even encourages companies to invest in high-tax foreign countries, rather than the United States, because once assets are offshore, the resulting profits can be moved fairly easily on paper to tax havens. Loopholes in the existing tax code also encourage and reward large corporations to game the rules to treat their profits as having been earned abroad even if they were actually earned in the United States. Profit shifting by multinational corporations costs the United States tens of billions of dollars in revenue. This system is badly in need of reform to reverse the bias toward offshore investment and prevent profit shifting. Romney’s new and expanded subsidy for offshore investment Romney’s economic platform would exacerbate these harmful features of the international tax system. He pledges to move the United States toward a “territorial” tax system. What this means is that instead of paying a deferred tax on their foreign profits, U.S. corporations would pay no U.S. tax. Exempting overseas profits from tax would be a tax cut for multinational corporations of $130 billion over 10 years. When combined with Romney’s proposal to slash the top corporate rate from 35 percent to 25 percent, which would cost more than $900 billion, it pushes the total corporate tax cuts in the Romney plan to over $1 trillion. A bigger reward for shipping U.S. jobs abroad Exempting U.S. corporations’ foreign profits would sweeten the tax code’s already-rich inducements to move investments and jobs overseas. A U.S. company deciding whether to build a factory in the United States or elsewhere would know that the returns from its investment, if made abroad, would be permanently free of U.S. tax—not merely tax deferred, as under our current system. That would result in a large tax cut for some U.S. multinationals, but it would run counter to the interests of U.S. workers. In recent testimony, Congressional Research Service economist Jane Gravelle explained that a territorial system: ... would make foreign investment more attractive. That would cause investment to flow abroad, and that would reduce the capital with which workers in the United States have, so it should reduce wages. [A territorial system] will increase the after-tax rate of return that firms see abroad, so they will want to move their investments--they would want to make investments abroad, instead of the United States. Gravelle concludes that because a territorial tax system distorts investment decisions, pushing investment offshore, it is “not neutral or efficient.” An analysis by Reed College economist Kimberly Clausing similarly finds that “the tax incentive to locate jobs in low-tax countries would increase significantly.” Clausing estimates that investment and profits would migrate to low-tax countries, resulting in 800,000 jobs in low-tax countries and potentially displacing U.S. jobs. Economy – Tax Cuts 2NCRomney’s tax cut policy destroys the economy and prevents growthZakaria 12 (Fareed Zakaria, PhD from Harvard, writes a foreign affairs column for The Post, 6/7/12, The Washington Post, “Romney is wrong on tax cuts,” http://www.washingtonpost.com/opinions/fareed-zakaria-romney-is-wrong-on-tax-cuts/2012/06/07/gJQAy1pHLV_story.html) By contrast, Mitt Romney’s first major ad is substantive — and wrong. He tells us that on his first day in office — after approving the Keystone XL pipeline — he will “introduce tax cuts . . . that reward job creators not punish them.” The one idea that is almost certain not to jump-start this economy is a tax cut. Why can we be sure of this? Because that is what we have done for the past three years. For those who think President Obama’s policies have done little to produce growth, keep in mind that the single largest piece of his policies — in dollar terms — has been tax cuts. They actually began before Obama, with the tax cut passed under the George W. Bush administration in response to the financial crisis in 2008. Then came the stimulus bill, of which tax cuts were the largest chunk by far — one-third of the total. The Department of Transportation, by contrast, got 6 percent of the total to fix infrastructure. That wasn’t the end of it. There was the payroll tax cut, the small business tax cut, the extension of the payroll tax cut, and so on. The president’s Twitter feed boasted: “President Obama has signed 21 tax cuts to support middle class families.” And how has that worked out? In the wake of a financial crisis caused by excessive debt, tax cuts are highly unlikely to lead to increased economic activity. People use the money to pay down their debts rather than shop for cars, houses and appliances. As for the idea that job creators are not creating jobs because their taxes are too high, think about it: Would Mitt Romney invest more of his money in American factories if only he had paid less than the 13.9 percent rate he paid last year? Please! The Wall Street Journal invoked Milton Friedman to say that the problem with all of these tax cuts is that they are temporary. If only we had across-the-board cuts in rates. Except that these were tried as well. The 2001 Bush tax cuts were designed precisely along those lines. They were, in dollar terms, the largest tax cuts in U.S. history. And the nonpartisan Congressional Research Service concluded in 2010 that “by almost any economic indicator, the economy performed better in the period before the [Bush] tax cuts than after the tax cuts were enacted. . . . GDP growth, median real household income growth, weekly hours worked, the employment-population ratio, personal savings, and business investment growth were all lower in the period after the tax cuts were enacted.” The years 2000 to 2007 were the period of the weakest job growth in the United States since the Great Depression. The one certain effect of tax cuts would be to balloon the deficit. Bruce Bartlett, a former economic official under Ronald Reagan, points out that the aggregate revenue loss of the Bush tax cuts was the largest in U.S. history. “Both Harry Truman and Ronald Reagan passed larger individual tax cuts, but both took back about half of them with subsequent tax increases.” When pressed, Romney and his advisers sometimes say that they are just for tax reform; other times, they cite the Simpson-Bowles plan. I’ve long argued that reforming the nation’s bloated and corrupt tax code is vital and that Simpson-Bowles is a superb framework for deficit reduction. But neither will cut taxes. Simpson-Bowles raises them by more than a trillion dollars. You can use euphemisms such as “ending tax expenditures” and “closing loopholes,” but when you do that, someone’s taxes will go up. And when you close big loopholes such as the deduction of mortgage interest — which is the only way to get real revenue — tens of millions of peoples’ taxes will go up. Tax cuts have been a central cause of America’s deficit problems. For four decades, Washington politicians have bought popularity by cutting taxes, always saying that spending cuts or growth will make up for lost revenue. That rarely happened, and the result is $11 trillion in federal debt held by the public. To perpetuate this pandering one more time is not just dishonest — it is dangerous. 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