Is Obama Now the Tax Raider-in-Chief?

Another day another bungled plan that will do more harm then good.

In promoting its new global tax raid, the White House fingered the Netherlands, which it lumped with Ireland and Bermuda as "small, low-tax countries" that supposedly account for an outsize share of reported foreign profits of U.S. firms. The Dutch corporate tax rate is 25.5% -- which isn't even all that low by current European standards. And the U.S. is the largest foreign investor in that "small, low-tax country," according to the Dutch Embassy. Perhaps reducing American investment there and slamming the Netherlands as a tax haven is Mr. Obama's way of reaching out to friends and allies.

But the Netherlands won't be the only country hurt. The explicit goal of this plan is to reduce the incentive for U.S. companies to invest abroad, which Mr. Obama derisively calls "shipping jobs overseas." Foreign companies may relish the loss of U.S. corporate competitiveness that his proposal will bring in the short term. But in the long term, reducing U.S. investment globally will hurt everyone. And that investment is a two-way street -- the Netherlands is also the fourth-largest foreign investor in the U.S.

Ending the foreign tax deferral plan in place is a dagger aimed at the heart of US tech companies. Some of these companies make more then half of their revenues outside of the US. So if they were taxed on that outrageous US tax rate of 39% then suddenly Ireland and their 12% tax rate looks like a great place to move to.

So you might just see quite a few Silicon Valley jobs move right out of the US. So this plan is basically antigrowth, will destroy jobs and, might not even get as money in taxes as they expect.

But even as a revenue raiser, this is likely to fail. Fewer companies will keep their headquarters in the U.S., especially small or mid-sized firms that can slip away without becoming a political target. Those companies that can't flee will sooner or later demand relief from Congress, which will be happy to create even more loopholes.

My guess is that California liberals will fight this measure tooth-and-nail on behalf of their tech constituencies like Google, HP, Amazon, and Dell. There is absolutely 0% chance that this will even get out of committee let alone be put up to vote.