Busch: A Positive Tax Shift
One of the potential major negatives for US companies doing business overseas was the potential for a tax increase by the Obama administration to raise $200 billion. This was floated as an idea and Jason Furman communicated it to the US international corporate community by saying, "We need the money." This is a theme that will be repeated over and over as Congress and the White House attempt to pay for their programs and to contain the deficit.
However, corporate America pushed back. Changing existing tax treaties/arrangements with other countries is an extremely delicate and difficult task. Essentially, it creates more negative unintended consequences than positive tax flows into the US Treasury's coffers.
The WSJ reports that the Obama administration's back tracking on this issue, "....suggests that an administration that was critical of business at the height of the financial crisis is becoming more accommodating. The White House, through a series of presidential lunches and other outreach, is trying to soothe tensions with multinational companies." If this is true, this is a very positive development.
What I hope to see going forward from Congress and the White House is an attitude of getting the right environment for getting people back to work. This is different from the government giving people jobs and creating increased deficit spending to do it. This is about a mindset that says "I wake up every morning trying to find ways to help businesses create jobs". Currently, I don't see this attitude, but the dropping of the international tax idea is a good start.
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As the criticism grows over the lack of jobs created by the $787 billion stimulus, this is the direction we need to see coming from D.C. It would signal a shift from a dogmatic "government-is-the-answer" approach to a pragmatic "business-creates-jobs" approach. This would truly signal a change that will lead to jobs and that the markets will love. Let's see if more is coming....Given how negative and detrimental the past approach has been towards business in the US, everything looks up from here.
Andrew B. Busch is Global FX Strategist at BMO Capital Markets, a recognized expert on the world financial markets and how these markets are impacted by political events, and a frequent CNBC contributor. You can comment on his piece and reach him hereand you can follow him on Twitter at http://twitter.com/abusch.