Geithner’s chiding of others should lead to export friendly tax reform here

Timothy Geithner has been chiding the Chinese for not doing enough to revalue the yuan. This has led to him speaking out on export and trade issues at the current G20 (as covered by the WSJ here)

My friend Andy Sundberg wrote this in a comment to that article:

If Treasury Secretary Timothy Geithner really wanted to do something useful about addressing the American trade deficit, he would not have to look anywhere farther than the very creative promises that Barack Obama made to overseas Americans when he was campaigning for President in 2008.

Mr. Obama said he would work closely with overseas Americans, talk regularly to us, and get us back on a level playing field in world markets. This is precisely what the GAO and the President’s Export Council urged three decades ago as the best way to improve our trade performance.

Alas, so far, neither Mr. Geither, nor his boss, Mr. Obama, have gone back to take a look at these promises. They should. The answer is already there.

Overseas Americans have been shoved off a level playing field in world markets every since 1962. We have now had 35 straight years of trade deficits totalling over $7.5 trillion, and increasing every day at a rate of more than $1.5 billion.

If overseas Americans were given the chance to compete on a level playing field once again this trade deficit would start to come down and we might soon be back in the game with a much more competitive team.

Mr. Obama signalled that he understood this when he was running for office. He needs to be reminded of his promises and we will all be winners.

Andy asked people in his network to chime in so I did and added this post:

I have to agree with Mr Sundberg as well. The unique situation of American workers overseas leads to large disincentives for companies to hire them and for people to go overseas to work. The current and previous governments paint Americans overseas as millionaire tax evaders – who can justifiably be taxed punitively. The IRS has also increased reporting requirements on foreign banks in excess of what it requires on banks and tax havens domestically in the USA. This has led some foreign banks to restrict or close bank accounts for Americans who work or have worked overseas (and extends to anyone designated an “American person” by the IRS – which is essentially anyone who has ever worked in the US, e.g. foreign students). Foreign banks now advise their local investors to AVOID investing in the US because of onerous tax and reporting requirements. It is easy to see how this restricts exports. The reprise of the Ugly American.

The US has (to mix a few metaphors) shot itself in the foot by building large speed bumps to exports. These things are by no means fore-ordained. The US could, with an adjustment of its tax policies change to more export growth. But the current administration has decided, contrary to its stated campaign promises as Mr. Sundberg points out, instead to carp at others, whine, and continue increase its anti-export tax treatment of overseas Americans and foreign investors.


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