Roger Conklin, a frequent contributor at Isaac Brock, has just had a letter published in the Wall Street Journal. I have been off the grid for a few days, so maybe it has been posted somewhere. If I missed it, I apologize, but thought I would pull out out for headline attention.
Nicole Tichon’s July 30 letter says that in many countries, with territorial tax systems that don’t tax corporate earnings when remitted back home, “unemployment is at record levels.”
This ignores the indisputable fact that Germany, a territorial tax country where wage levels are higher than in the U.S. and which has the highest job-creating 12-month trade surplus in the world of $248.5 billion, has its record lowest unemployment rate in 21 years. Germany exports 7.9 times more per capita of its products to China, priced higher than ours, than does the U.S., and Germany has balanced trade with China. Germany is actively recruiting qualified foreign workers to fill German manufacturing job vacancies that are going begging.
Unlike what only the U.S. does, Germany doesn’t subject its citizens living abroad to German income tax on top of the tax they pay their host countries, so Germans relocate abroad and capture foreign markets. Americans, unable to survive this double taxation, stay home, and the U.S. continues to lose export market share.
Compare this with the “fruits” of the U.S. world-wide corporate and citizenship-based personal tax systems, which are a $721.8 billion 12-month world-trade deficit (60% of the world’s total) and $315 billion trade deficit with China. By replacing our world-wide corporate and citizenship-based taxation with the territorial system of most of all other civilized nations, we would not only level the competitive playing field for U.S. corporations and our citizens we could create millions of new American jobs producing for export. This would also eliminate most of the tax-haven problem.
Palmetto Bay, Fla.
A version of this article appeared August 8, 2013, on page A12 in the U.S. edition of The Wall Street Journal, with the headline: Territorial Tax: Whose Money Is It?.