Odd to say it works by complaining about how it works

Why is Donald Trump planning to give away $700 billion — that’s billion, with a “b” — to foreigners, no strings attached? You probably didn’t know that he’s planning to do this. In fact, he himself almost surely has no idea that he’s planning to do this. But it would be one clearly predictable consequence of the tax “reform” he and his congressional allies are trying to pass.

Krugman’s point being that many US equities are owned by foreigners thus a reduction in the taxation of foreign profits will flow, as a benefit, to foreigners.

OK, fair point.

For what it’s worth, the argument goes like this: Cutting corporate taxes would bring foreign capital into the United States, which would raise investment, which would increase productivity, and this productivity would then get reflected in higher wages. If this sounds like a convoluted and uncertain story, with many weak links in the supposed chain of events that ends up helping workers so much, that’s because it is.

It’s actually entirely standard reasoning on the point but still.

What this means is that around 35 percent of a tax cut from an administration that proudly uses the slogan “America first” — $700 billion over the next decade — wouldn’t even go to Americans. Instead, it would be a windfall to wealthy foreigners, who would probably gain a lot more from the tax cut than U.S. workers. Oh, and it makes all that talk about allies not paying their “fair share” sound kind of silly, doesn’t it?

Err, yes. But by lowering the tax foreigners pay we’ll raise the incentive for foreigners to invest in the US. That’s rather the logic of the point in the first place, isn’t it?

14 thoughts on “Odd to say it works by complaining about how it works”

  1. For what it’s worth, the argument goes like this: Cutting corporate taxes would bring foreign capital into the United States, which would raise investment, which would increase productivity, and this productivity would then get reflected in higher wages. If this sounds like a convoluted and uncertain story, with many weak links in the supposed chain of events that ends up helping workers so much, that’s because it is.

    In other news, Brexit will destroy the British economy because it will deter foreign investment.

    It is fortunate for the Left that their audience are some of the stupidest people on Earth, it means they can continually get away with cynical misrepresentations like this.

  2. Solid Steve 2: Squirrels of The Patriots

    Funny how “America” is just a racist social construct and only beady-eyed nativists see a difference between “Americans” and foreigners, and BTW fuck having borders and laws and national identity and shit … until it’s time to criticise BLONALD BLUMPFH, in which case how do you do, fellow Americans?

  3. I know Mr Krugman is terribly clever and won a nearly Nobel prize and that I am just a thicky with an arts degree but it does very often seem that most of his arguments are Spud-style ‘more tax is better because reasons’.

  4. MC –

    It’s actually far more primitive than ‘more tax is better because reasons’. With Krugman it’s ‘whatever Republicans do is bad, because Democrats’. If Clinton had won and made the exact same proposal, Krugman would be praising it to the heavens.

    He’s nothing more than a credentialled fanboy, and it’s all rather pathetic to watch.

  5. give away
    foreigners
    no strings attached
    he himself almost surely has no idea
    tax “reform”
    a convoluted and uncertain story
    weak links
    supposed
    an administration that proudly uses the slogan “America first” [and annoying the crap out of Krugman]
    windfall
    wealthy foreigners

    Krugman gives us word salad with all sorts of irritating croutons.

  6. Here’s another few points to throw in.

    I’m Canadian resident in Canada and own shares in American companies through a Canadian Registered Retirement Savings plan. I pay no American tax on the dividends that plan receives because of a tax treaty. If corporate tax rates go down and my dividend go up, I won’t pay any taxes on the increase.

    I also own some NYSE:ETP in that RRS plan and some NYSE:UPS outside of the plan. The Yanks take a withholding tax on every distribution from those two, but I do get to deduct that from my Canadian taxes. The tax treaty for retirement plan tax exemption covers share dividends, not limited partnership distributions. Why? Who knows.

    CAD has increased a lot against the USD so as result I had at one point lost spendable local money on my UPS shares which had increased by less than the increase in CAD.

    My annual keep or sell calculations are wondrous convoluted.

    Finally, has Krugman ever considered what would happen to share prices were corporate taxes to be reduced? I don’t know because he’s a corrupt lying asshole as Dennis points out, and I won’t read him. But surely the price of stocks would surge as against other possible investments like land and bonds.

  7. Are foreigners more likely to employ US workers and generate US employment, income and spending taxes if those foreigners have 40% of their profits taken off them or 30%? Hmmm. Would you be more like to buy the 40p or 30p identical loaf of bread? Or if forced to pay 40p, buy the sponge cake instead.

  8. Notice those words again?

    “Donald Trump planning to give away $700 billion — that’s billion, with a “b” — to foreigners, ”

    No he isn’t. It’s their bloody money. he’s just planning on taking less of it.

  9. “$700 billion over the next decade”

    I effing hate it when they do this. “$70bn a year” would have made his point just as well; there’s no need to pile confusing figures on top.

  10. We don’t try to tax the incomes of foreigners living in foreign; so why on earth do we insist on taxing their capital?

  11. The thing is there isn’t really a morally justification for taxing oversea’s capital.

    They use no services, impose no costs, cannot vote and are a significant benefit the US economy.

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