The Economic Benefits Of Provisions Allowing U.S. Multinational Companies To Defer U.S. Corporate Tax On Their Foreign Earnings

For years, some politicians have proposed to increase the tax burden on the profits earned by American companies outside the United States, and Congress is now considering legislation that would sharply limit the “deferral” rules that protect U.S. businesses from bearing much higher tax burdens on their earnings abroad than their foreign competitors. Economic research has established, however, that in the global networks of America’s international companies, these foreign investments and jobs do not cut into investment and jobs at home, but rather increase them. As a result, the current proposal to substantially restrict “deferral” would end up reducing American jobs and investment and could impair our economic recovery.

This study analyzes the economic effects of repealing the deferral rules that have governed the way we tax the foreign earnings of U.S. companies since the advent of the corporate income tax in 1913. The administration proposal would not repeal deferral completely, but it does move significantly in that direction. The results will be same – making U.S. companies less competitive in global markets and costing American jobs.