Obama continues his war against American businesses

Jim Powell:

JUST as the economy begins showing glimmers of a turnaround, here comes President Obama with a "tax-reform" effort that's sure to sock the stock prices and after-tax profits of many of the biggest US employers.

Obama's $190 billion business-tax hike will hit Americans whose jobs and pensions depend on these companies doing well, and will increase pressure on already struggling colleges and hospitals. Why? Because millions of individual investors hold the companies' stocks in their portfolios, mutual funds and pension funds, as do many colleges, hospitals, museums and other institutions in their endowments.

Among the important employers in Obama's crosshairs: Aetna, Alcoa, Allstate, American Express, Berkshire Hathaway, Best Buy, Cisco Systems, Coca-Cola, Costco Wholesale, Dell, Dow Chemical, DuPont, Exxon Mobil, Ford, General Motors, GMAC, Hewlett-Packard, Honeywell, IBM, Intel, Johnson & Johnson, Kraft Foods, Kroger, McDonald's, Merck, Microsoft, Motorola, News Corp., PepsiCo, Pfizer, Procter & Gamble, Safeway, Sears, Sprint Nextel, Supervalu, Sysco, Target, Time Warner, Walgreens and Walt Disney.

Obama is outraged that these employers use offshore tax havens to reduce their tax burdens. But America has one of the world's highest effective corporate-tax rates, 36 percent, while the average for most other nations is 20 percent. This undermines US-based companies' competitiveness.

Moreover, America levies taxes on corporate profits when they're earned, and then taxes the portion of profits that are distributed as interest or dividends. And when an investor uses after-tax personal income to buy a stock that happens to go up, the US levies a tax on the capital gain (a tax Obama wants to increase).

If Obama succeeds in preventing US-based companies from using offshore tax havens, their effective tax rates will go up. There will be further downward pressure on their stocks, many of which are already down by half from recent peaks.

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Obama is looking more and more like a typical tax and spend liberal Democrat that does not comprehend business as anything other than a cash cow for their programs. His fundamental error is that he does not recognize that corporations do not pay taxes anyway. They merely collect takes from their customers and hand the money over to the government. By making them collect more from their customers they have less to hire employees and invest in new products and services that will grow the business and the economy.