Really, it’s time for the United States to stop taxing citizens who live outside the United States and the profits of corporations that are earned outside the United States. Territorial taxation for both.
Republican victories in Tuesday’s U.S. midterm elections are unlikely to rattle equity markets, but could lead to significant changes in corporate tax policy and mark the beginning of the end for popular tax inversion deals that saw Burger King Worldwide Inc.’s proposed merger with Tim Hortons Inc.
S&P 500 companies earn 40% of their profits abroad, up from 15% in the mid-1990s. As a result, most large U.S. multinationals are exasperated by high U.S. corporate tax rates and more so by the taxes imposed on foreign profits when repatriated.
“U.S. companies cannot compete effectively abroad if they must pay taxes that companies headquartered elsewhere don’t,” said David Bianco, chief U.S. equity strategist at Deutsche Bank. “The slew of inversions, which Treasury recently rushed to impede, is evident that U.S. politicians don’t understand global business.”
A Republican-led Congress could pass legislation that establishes a timetable for transitioning the U.S. to a…
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