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The Increasing Irrelevance of Corporate Nationality

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Cross-posted from Robert Reich Blog

From youtube.com/watch?v=KaEoQgPNxDk: Corporate Tax Evaders
Corporate Tax Evaders
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"You shouldn't get to call yourself an American company only when you want a handout from the American taxpayers," President Obama said Thursday.

He was referring to American corporations now busily acquiring foreign companies in order to become non-American, thereby reducing their U.S. tax bill.

But the President might as well have been talking about all large American multinationals.

Only about a fifth of IBM's worldwide employees are American, for example, and only 40 percent of GE's. Most of Caterpillar's recent hires and investments have been made outside the US.

In fact, since 2000, almost every big American multi-national corporation has created more jobs outside the United States than inside. If you add in their foreign sub-contractors, the foreign total is even higher.

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At the same time, though, many foreign-based companies have been creating jobs in the United States. They now employ around 6 million Americans, and account for almost 20 percent of U.S. exports. Even a household brand like Anheuser-Busch, the nation's best-selling beer maker, employing thousands of Americans, is foreign (part of Belgian-based beer giant InBev).

Meanwhile, foreign investors are buying an increasing number of shares in American corporations, and American investors are buying up foreign stocks.

Who's us? Who's them?

Increasingly, corporate nationality is whatever a corporation decides it is.

So instead of worrying about who's American and who's not, here's a better idea: Create incentives for any global company to do what we'd like it to do in the United States.

For example, "American" corporations get generous tax credits and subsidies for research and development, courtesy of American taxpayers.

But in reducing these corporations' costs of R&D in the United States, those tax credits and subsidies can end up providing extra money for them to do more R&D abroad.

3M is building research centers overseas at a faster clip than it's expanding them in America. Its CEO explained this was "in preparation for a world where the West is no longer the dominant manufacturing power."

3M is hardly alone. Since the early 2000s, most of the growth in the number of R&D workers employed by U.S.-based multinational companies have been in their foreign operations, according to the National Science Board, the policy-making arm of the National Science Foundation.

It would make more sense to limit R&D tax credits and subsidies to additional R&D done in the U.S. over and above current levels -- and give them to any global corporation increasing its R&D in America, regardless of the company's nationality.

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http://robertreich.org/

Robert Reich, former U.S. Secretary of Labor and Professor of Public Policy at the University of California at Berkeley, has a new film, "Inequality for All," to be released September 27. He blogs at www.robertreich.org.

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