As the Mississippi director for the Appalachian Regional Commission – a federal-state community and economic development agency – I spend every working day focused on programs aimed at improving the quality of life in the 24 counties we serve in Northeast Mississippi.
Our region’s economy is changing, and a number of factors are increasingly connecting employment here to commerce abroad. Therefore, any federal policy that hurts the ability of American businesses to grow in foreign markets has ramifications for local jobs and economic growth.
Congress is currently considering just such a harmful policy – a $200 billion new tax that singles out the international revenues of U.S.-based companies. Mississippi’s congressional delegation should stand united against this misguided tax proposal.
With low state corporate taxes and fees, reasonable power rates and affordable real estate, Mississippi is an attractive location for businesses to establish and maintain manufacturing and operational facilities. This is one reason why Toyota and many others chose to locate and expand in Mississippi.
U.S. businesses – even when they are headquartered in other states – also turn to Mississippi for satellite operations. For example, Ohio-headquartered Cooper Tire maintains a major plant in Tupelo. Most of Cooper’s tires are manufactured in the U.S., but the company sells its products around the world. This makes sense, of course, because the vast majority of consumers live outside the U.S.
Other U.S. companies with local facilities and international sales include Tecumseh Products, MTD Products, several furniture and chemical manufacturers, and others. The bottom line is that global sales, directly and indirectly, sustain jobs here.
If the international sales of U.S. businesses stall or decline, employment and economic growth will inevitably be impaired in the U.S., including in Mississippi. The proposed tax on the foreign revenues of American companies would have just such an impact by making our companies less competitive against foreign rivals and siphoning funds away from business development and new job creation.
When it comes to tax policy, the U.S. is already out of step with most other industrialized nations. Worldwide American companies pay taxes to nations where transactions take place and then pay an additional tax to the U.S. government. With just a few exceptions, other developed countries utilize a territorial tax system: companies only pay taxes to the nation where revenues are earned, without facing a second tax in their home nation.
Because of the imbalance between these two types of tax systems, the U.S. government has long allowed American companies to defer tax payments on foreign revenues under certain conditions, such as reinvesting in business growth. This allowance also helps American companies keep their prices competitive in markets around the world.
The proposed new tax rules would reverse this long-standing policy and make American companies immediately liable for tax payments on foreign revenues. Of course, companies from other nations would not face this drastic new expenditure.
Without a doubt, the federal government needs to address its considerable budget challenges. The administration has drastically increased our debt to fund economic recovery, and a host of new initiatives will require additional funds. As they look for new sources of new revenue some businesses operating overseas have become an easy political target.
But economic growth leads to greater tax revenues, from businesses and individuals. In addition, greater employment decreases the financial burden placed on public assistance programs. The cost to jobs and economic growth resulting from the proposed new tax could very well nullify whatever new revenues are collected.
Members of Congress are under tremendous pressure to stop the flow of red ink that will be a burden to American taxpayers for years to come. But that pressure should not result in an unfair and ultimately damaging tax policy. Several issues divide Democratic and Republican legislators from Mississippi, but they should all be united when local jobs and economic growth hang in the balance. We hope our entire delegation will fight this proposed tax policy.
Mike Armour is director of the Appalachian Regional Commission, Mississippi, headquartered in Tupelo. Contact Armour at MARMOUR@mississippi.org, or write to him at 330 Jefferson St., Tupelo, MS 38804.