I've got this professor -- the kind that's been retired for 20 years, was born a century ago, and rather than spending time at home with wife and family celebrating his lucrative job earning a ton of money helping big multinationals evade taxes legally such a long and successful career in order to pontificate on the virtues of laissez faire capitalism teach law students sadly ignorant of the basics of economics and finance  -- who's driving me nuts enough to vent online to strangers under cover of relative anonymity. 

Okay, I'm no huey L, and I've spend enough time in corporate america to at least listen to both sides.  Often I find myself in some strange netherworld where the liberals look at me like I'm something stuck on the bottom of their shoe when I, e.g., take five minutes to explain that a lot times, asbestos defendants *aren't* actually guilty in this day of age...but I get the "oh *wack*-o" stare from the biz friendly coworkers when I talk about how maybe drug legalization isn't a bad thing and how could we possibly think slavery's social reverberations have possible gone away forever.   But this old dude is KILLING ME.

He's got his panties in a twist for fear the obama administration's going to eliminate corporate tax deferral.  and then US multinationals will be "forced" to pay US tax rates on ALL their income and therefore they will not be competitive (this of course is given in absolute terms) and america will go down the toilet.  I mean, to the extent it hasn't already.  no offense, thailand. 

here's a primer (and I have said old guy to thank): US multinationals with subsidiaries (separate legal entities, but owned and controlled by US corporations) overseas don't generally pay tax on the income of the sub until the subsidiary issues dividends back to the US corporation.  this is called tax deferral. 

so basically treasury gives US multinationals an interest free loan in the amount of their tax liability on foreign income. But back in the 60s the kennedy administration was resolved to make sure they paid at least part of their fair share, and created Subpart F -- a fond nickname for an exception and a loophole to the exception and an exception to the loophole to the exception to tax deferral.  Basically, it's this: US multinationals have to pay US tax immediately on foreign income that can easily be moved around.  Ie, such income doesn't require, oh, an office with workers actually working or a factory actually making.  Real industry, not "I get paid for doing nothing" income.  You know, the kind that gets all those preferable tax rates.  But I digress.

So basically, passive income gets taxed right away--it doesn't get deferred til it comes on home through the form of corporate dividends.  This is designed, for example, so people dont move their trust fund to, oh, caymen or bermuda, solely to avoid income tax.  "real" honest to goodness business income located overseas because, uh, there's a market and workers there -- that still gets deferral.

So why is this cat so upset??? why the doom and gloom??? he drank the kool aid for 60 years, so I guess I forgive him, even though he calls me "sweetie."  still, when you're only response is: "Japan's the only other country in the world who taxes its citizens on their foreign income," well, that sounds a little like kindergarten-style deflection to me. 

And here's another question.  why does everyone worry about the corporations remaining competitive when *I* dont get tax breaks.  and isn't it *my* available cash that buys the crap at wal-mart that allows wal-mart to make money and be productive and create more jobs (somewhere, at least)???? since when does wal-mart make better use of a buck than I do??? (okay, I know I didn't *need* that second pair of red pumps, but the point still stands).

has anyone ever actually done a study on the effect of country x vs country y tax rates, along with the PLETHORA of other variables that determine where a business wants to locate (governance issues, access to capital markets, labor force, natural resources, etc) such that we should actually start taking the "my taxes...sniff...are too *high*" argument seriously?