Actions Have Consequences

Bloomberg.com reported yesterday that Microsoft Corp. Chief Executive Officer Steven Ballmer said that if President Obama's tax plan to impose higher taxes on U. S. companies overseas profits goes through Congress, Microsoft would move some employees offshore.  The idea of President Obama's plan is to increase corporate revenue into the U. S. Treasury by changing the tax policies on U. S. business operating overseas.  There are, however, a few things that need to be considered.  Businesses are in business to make a profit.  If taxes on a business are increased, the business will either find a way to avoid those taxes or they will pass the cost of those tax increases on to the consumer.

There are two possible end results on changes to the tax laws concerning companies doing business overseas.  The first is that U. S. companies such as Microsoft will move jobs out of this country into other countries.  The second is that the companies affected by the changes in the tax code will simply charge more for their products, causing a possible reduction in sales.  Both actions result in less, not more, money coming into the treasury.  I think the Obama Administration needs to rethink this.