The corporate tax "reform" proposed in President Obama's budget would make F.A. Hayek flip in his grave. The
budget makes a fetish out of going after the trillion dollars in foreign earnings. American companies don't bring this money home because they'd be slapped with a corporate tax rate that's the highest in the free world. Moreover, America is among a few OECD countries that taxes the foreign earnings of domestic companies.
But instead of simply cutting these rates, the administration has come up with a draconian scheme to make companies pay their "fair share" that is a perfect illustration of Hayek's road to serfdom logic. Under this scheme, the president would eliminate the "deferral loophole" that allows companies to stash cash abroad.
Instead, it'll impose a 14 percent surcharge on their existing foreign holdings, an illicit form of retroactive taxation that is meant to fund its noble public works projects and middle-class entitlements. Obama is also proposing a 19 percent tax on future foreign holdings of these companies. "The administration hopes that if companies have to pay a tax on foreign income regardless of where they park it, they will bring it back home," I note. "That wishful thinking will backfire."
Go here to find out why and what the administration will do when it does.