If U.S. Imposes Higher Taxes On Foreign Profits, Then Microsoft Moves More Jobs Offshore

Posted Jun 3, 2009

As much as I like President Barack Obama, I must say that I agree with Microsoft Corporation CEO Steve Ballmer about his opinion on a new plan to impose higher taxes on companies with foreign profits.  Last month, President Obama proposed a plan to restrict $190 billion in tax breaks for offshore companies.

From a simple macroeconomics standpoint, I believe that punishing companies that offshore “grunt work” hinders the expansion of the production possibilities curve for the United States.  The proposed plan “makes U.S. jobs more expensive,? according to Ballmer.  ?We?re better off taking lots of people and moving them out of the U.S. as opposed to keeping them inside the U.S.?

The current U.S. tax rules for overseas profits is that companies can defer corporate rates as high as 35%, assuming that these profits remain invested overseas.  President Obama believes that ending these incentives will promote companies to invest more in domestic jobs.  The President also has a valid point.

Microsoft employs 95,029 individuals across the globe.  About 56,552 are based in the United States. Due to the economy, the software giant had to lay off about 5,000.

What is your opinion on this situation?  It’d be interesting to see what sort of discussion comes out of Ballmer’s opinion on the economy.  Leave a comment when you have some spare time.

[via Bloomberg]