Rana Foroohar reports on problems with our economy

Rana Foroohar
Time Magazine, 1/24/2013

EVER HEAR OF A DOUBLE IRISH? HOW about a Dutch Sandwich? These aren't cocktails or bar snacks but rather complex financial strategies used by many American companies to transfer profits they earn abroad to countries with the lowest tax rates. Despite the goofy nicknames, these techniques have a serious purpose: to keep money away from the U.S. whenever possible to avoid paying the higher tax rates in effect at home. Ireland, for instance, taxes corporate earnings at 12.5%, compared with the U.S. rate of 35%. Big companies like GE and Apple have gotten very good at this game. By some estimates  U.S. corporations have $1.7 trillion in foreign earnings stashed under mattresses abroad. Now they and others say they would be happy to bring foreign earnings home-repatriating them, in accounting lingo-if only the U.S. would change its laws and make overseas profits tax-free. This is known as a territorial tax system: only income generated inside the home country gets taxed by that country. Amid the fiscal-cliff debate over individual tax rates, hardly anyone has paid attention to a number of reforms being advocated by Republicans that would shift the U.S. to such a system. (In the short term, business lobbyists are looking for a temporary tax holiday allowing repatriation at a 5.25% rate for a year, an idea supported by a number of conservative politicians and some liberals.)

Advocates say it would lift the U.S. economy  companies would put this money to good use by investing at home and creating jobs. But while the plan might well goose the stock market, it won't create more jobs. In fact, it might even do the opposite.