New Protectionism

Hey, that tax revenue ain't gonna raise itself! President Obama is going to "take away the tax breaks that reward companies for moving jobs overseas." 'Bout damn time, huh? Who could possibly be against that?

When the President is speaking, hang on to what is left of your wallets and liberties. Professor Mankiw links to a Mahir Desai paper that exposes it as the "New Protectionism" that it is:

Tax policy toward American multinational firms would appear to be approaching a crossroads. The presumed linkages between domestic employment conditions and the growth of foreign operations by American firms have led to calls for increased taxation on foreign operations - the so-called end to tax breaks for companies that ship our jobs overseas. At the same time, the current tax regime employed by the U.S. is being abandoned by the two remaining large capital exporters - the UK and Japan - that had maintained similar regimes.
[...]
Similarly, the weight of the empirical evidence is that foreign activity is a complement, rather than a substitute, for domestic activity. Much as the formulation of trade policy requires resisting the tempting logic of protectionism, the appropriate taxation of multinational firms requires a similar fortitude.

Economics and Markets Posted by John Kranz at May 4, 2009 4:13 PM