On This Week yesterday, McCain economic adviser Carly Fiorina restated her support of tax loopholes for big business. Fiorina, the former CEO of Hewlett Packard, has been a long-time defender of a gap in the U.S. tax code that enables American corporations to keep foreign profits overseas and abstain from paying domestic taxes.
The Wonk Room, which covered Fiorina’s preference for corporate tax breaks and offshoring back in April, wasn’t really surprised to hear her defending McCain’s stance on George Stephanopoulos’ show. But we were a little surprised to see how easily George was able to point out the flaw in her logic — and how transparently disingenuous Fiorina’s talking points really are.
Sen. McCain, according to Fiorina, understands that “you must focus on why jobs are going overseas.” That may be well and good, but what Fiorina seems to be missing, and what George points out, is that there are two separate issues. A cut in the corporate tax rate is not the same as closing a tax loophole — a tax loophole that allows business profits to remain completely untaxed if left overseas.
Even under Senator McCain’s plan, corporations would still pay 25 percent (down from 35 percent) on money they bring into the country — and that is a lot more than the zero that they pay now. As Stephanopoulos noted, this zero percent does nothing to incentivize businesses, or government defense contractors, from bringing profits back into the US.
STEPHANOPOULOS: And senator McCain has come out for cutting the corporate tax rate, yet he still wants to preserve this tax break for keeping profits overseas. Why is that right?
FIORINA: Well, I think first of all, senator McCain understands that you must focus on why jobs are going overseas. There are really two issues. One as I said, the tax rate that we have in place today. The other is education and worker retraining, another area, for example, where John McCain differs from President Bush. He said a year ago, let’s take our unemployment insurance programs, let’s reform them. Let’s make sure that when workers lose their jobs because of globalization, for example that we just don’t leave them behind. That we don’t just pay them while they’re unemployed, that we prepare them.
STEPHANOPOULOS: I understand that he’s called for that, but why is he for preserving the tax break for keeping profits overseas?
FIORINA: Well describe for me the tax break that Obama feels is being maintained for companies who leave profits overseas. There is not an incentive today—I can tell you as a CEO, you don’t get a tax break for leaving profit overseas. What you get—
STEPHANOPOULOS: You get to defer the taxes on those profits as long as they stay overseas. That’s what he wants to take away—
FIORINA: That’s exactly the point. If the tax rate were lowered on businesses in this country, businesses would bring money back. The reason they cannot bring money back is because the tax rate is so onerous –
STEPHANOPOULOS: Not if they can pay no taxes for leaving them overseas; [Fiorina stutters] which is the way the law is right now.