Home > Obama and Strickland Killing American Jobs at Procter & Gamble

Obama and Strickland Killing American Jobs at Procter & Gamble

February 3, 2010 at 9:00 pm Matt Leave a comment Go to comments

There is a fantastic column today in the WSJ from Matthew Slaughter of Dartmouth’s business school, dealing with how proposed changes in tax law could destroy jobs, including those at Cincinnati-based Procter and Gamble:

Deep in the president’s budget released Monday—in Table S-8 on page 161—appear a set of proposals headed “Reform U.S. International Tax System.” If these proposals are enacted, U.S.-based multinational firms will face $122.2 billion in tax increases over the next decade. This is a natural follow-up to President Obama’s sweeping plan announced last May entitled “Leveling the Playing Field: Curbing Tax Havens and Removing Tax Incentives for Shifting Jobs Overseas.”

The fundamental assumption behind these proposals is that U.S. multinationals expand abroad only to “export” jobs out of the country. Thus, taxing their foreign operations more would boost tax revenues here and create desperately needed U.S. jobs.

This is simply wrong. These tax increases would not create American jobs, they would destroy them.

Academic research, including most recently by Harvard’s Mihir Desai and Fritz Foley and University of Michigan’s James Hines, has consistently found that expansion abroad by U.S. multinationals tends to support jobs based in the U.S. More investment and employment abroad is strongly associated with more investment and employment in American parent companies.

When parent firms based in the U.S. hire workers in their foreign affiliates, the skills and occupations of these workers are often complementary; they aren’t substitutes. More hiring abroad stimulates more U.S. hiring. For example, as Wal-Mart has opened stores abroad, it has created hundreds of U.S. jobs for workers to coordinate the distribution of goods world-wide. The expansion of these foreign affiliates—whether to serve foreign customers, or to save costs—also expands the overall scale of multinationals.

[...]

For many global firms there is no inherent substitutability between foreign and U.S. operations. Rather, there is an inherent complementarity. For example, even as IBM has been expanding abroad, last year it announced the location of a new service-delivery center in Dubuque, Iowa, where the company expects to create 1,300 new jobs and invest more than $800 million over the next 10 years.

This is true in manufacturing, too. Procter & Gamble calculates that one in five of its U.S. jobs—and two in five in Ohio—depend directly on its global business.

The current corporate tax structure soaks U.S. corporations at an astounding high and uncompetitive 35%, and increasing foreign taxation only weighs down American companies.

If Ohio had a Governor who was actually serious about “creating jobs,” then that Governor would urge President Obama to oppose these tax increases and save jobs at P&G.

But since Ohio doesn’t have that type of Governor- as a consolation prize, at least we will get a shiny choo-choo train.

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