Missouri international tax law expert: Massive changes in Congressional plans overshadowed

A Missouri based international tax law expert thinks some sweeping changes in proposals currently in Congress are being overlooked.

International Law Professor Adam Rosenzweig (Image Courtesy of Washington University, St. Louis)

Adam Rosenzweig, professor of law at Washington University in St. Louis, acknowledges domestic tax policy could see massive changes under Republican plans in both the House and Senate.

But he thinks even more striking changes are being proposed for international taxes.  According to Rosenzweig, policymakers largely agreed for a century that the goal of America’s international tax structure was to avoid interfering with business practices.

He says the intention was to be neutral.  “The U.S. tax regime accomplished this by imposing U.S. tax on worldwide income, but subtracting foreign taxes paid on that same income,” Rosenzweig said. “The idea was that removing barriers and distortions to trade and investment would result in faster growth for everyone.”

Now, for the first time, tax proposals in Congress include incentives and penalties designed to push companies to repatriate money and operations in the U.S. from overseas.

Rosenzweig isn’t arguing that American firms shouldn’t be bringing their income back the states.  But he doesn’t think changing the goal of neutrality in the international tax code is the proper way to bring about the desired change.

“The point I’m trying to make is that saying ‘What we’ve been doing hasn’t worked.  So, let’s give up trying.  Let’s just try a different goal.’  I believe that the fact that it doesn’t work means we’ve built a flawed system, not that goals were wrong in the first place.”

Rosenzweig would like to see the U.S. work with other countries through bodies such as the World Trade Organization or the Organization for Economic Co-Operation and Development (OECD) to settle disputes and develop a tax policy that treats all countries equitably.

Such bodies have no governmental power, but Rosenzweig thinks they could suggest guardrails to move countries in the same direction.

“The classic example is traffic lights, driving down the street.  If I’m driving in the United States, I drive on the right side of the road.  But if I’m driving in Britain, I drive on the left side of the road.  I don’t care which side of the road I drive on, as long as everyone drives in the same side, right?”

Rosenzweig thinks current international tax proposals in Congress could have a negative financial impact on other countries and would amount to the U.S. strong arming the rest of the world solely for its own gain.

“The 100% right,” said Rosenzweig.  “It is purely an exercise of leverage of power.  That’s why it’s such a stark difference to what it has been all the way in the whole rest of the history of the international tax system.”

Rosenzweig asked the tactics he spoke of were a reflection of the spirit of President Trump, Rosenzweig noted he wasn’t making a direct connection, but said “there seems to some sort of a zeitgeist there”.

He thinks it’s stunning how the terms of the debate over international tax law have changed so rapidly, and little or no fanfare.

Although he’s been published numerous times and has same pier backing, Rosenzweig is quick to point that that his opinion is opposed more often than not, and plenty of other international tax law experts disagree with him.

Some of the reviews Rosenzweig has written over the years include “Does Punishment Work (At Least in International Tax)?”, “Once A U.S. Corporation, Always a U.S. Corporation” and “Taking Sovereignty Seriously”

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