Why do U.S. companies relocate their plants overseas, thereby abolishing U.S. jobs?
a. They can hire workers at very low wages (such as 30 cents an hour in China).
b. The companies don't have to pay any employee benefits.
c. They don't have to comply with safety and environmental regulations.
d. They don't have to pay foreign taxes when they export their products back to us.
The correct answer is all of the above. The United States cannot require foreign governments to impose a minimum wage or safety regulations, or pay employee benefits. But the U.S. can and should do something about (d), the huge tax-rebate racket that lures U.S. companies to lay off American workers and set up shop in foreign countries.
Corporations located in the United States pay big U.S. corporate income and property taxes. It does a lot for their bottom line when they move to a foreign, tax-free utopia.
Foreign governments also tax corporations, but if the company exports its products to the United States, or other countries, the foreign government rebates (forgives) the tax. That creates an irresistible magnet to attract U.S. companies to transfer their plants to a land where they can avoid most of both countries' taxes.
It's no wonder that DaimlerChrysler AG will soon start building cars in China to ship back and sell in the United States under Chrysler names such as Dodge and Jeep. This decision means that 11,000 manufacturing jobs and 2,000 white-collar jobs will be eliminated over the next 24 months.
The suburban utility vehicle assembly plant in Newark, Del., will be closed. The Warren, Mich., truck plant and the St. Louis County, Mo., assembly plants will each lose one of two shifts.
The combination of avoiding U.S. corporate taxes and having Chinese taxes rebated (forgiven) will help DaimlerChrysler AG to sell new cars in the United States much cheaper than any it can manufacture in Detroit.
This should be prohibited because it is a huge subsidy, but world trade agreements have peculiarly defined subsidy to exclude tax rebates to exporters by calling it a rebate of the value-added tax. They get by with this subterfuge because that term is not understood by most Americans.
One way the United States is different from nearly all other countries is its system of taxation. The United States imposes taxes on income. We pay taxes on what we earn. Whereas 157 other countries impose taxes on consumption. They pay taxes on what they buy and call them value-added taxes, or VAT. The VAT system not only operates as a bribe to induce U.S. plants to move overseas, but it also operates to prevent U.S. products from being competitively sold in foreign countries. Here is how it works.
Phyllis Schlafly is a national leader of the pro-family movement, a nationally syndicated columnist and author of Feminist Fantasies.
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