The Agenda

Territorial Taxes and the Right’s Squandered Opportunity

I think it is fair to say that among tax reformers, the case for moving the U.S. corporate income tax to the territorial system used by most advanced market democracies is widely embraced. As David Saleh Rauf reports, the Obama administration’s decision to not only reject moving to a territorial system but to create a new minimum tax on all foreign earnings has been met with considerable resistance from leading technology firms and other business enterprises that conduct much of their business overseas. While I doubt that pressing for a territorial tax system will be a big vote-winner for conservatives, this is the kind of issue that, in theory, could encourage a shift of “policy demanders” in a rising sector to look on the right-of-center coalition more favorably, not unlike the decision of a large number of GOP legislators to oppose SOPA.

At the same time, however, many of the most vocal and active conservative policy demanders have been applying increasingly rigorous litmus tests to who does and does not count as a sufficiently devoted conservative, as David Brooks notes in his most recent column. This is to be expected, as policy demanding minorities are at their most influential during the primary process, when most voters, including most of the voters who lean towards one coalition or another, are not intensely engaged. So the drift of this year’s Republican primary shouldn’t be too surprising. The fact that the leading candidates all favor increasing skilled immigration is completely ignored. The fact that they once disagreed on various social policy objectives is a subject of intense interest.

Policy demanders have multiple identities and multiple affiliations. My sense is that the developments Brooks describes are making it very hard for conservatives to profit politically from the “shaking of the kaleidoscope” caused by the globalization of consumption (i.e., the emergence of an increasingly prosperous, import-hungry middle class in the “big emerging markets”) — an opportunity for the most competitive U.S.-based multinationals, in manufacturing but also in knowledge-intensive services — and Internet-enabled disruption, which threatens the interests of many policy demanding constituencies traditionally aligned with the political left.

Jeb Bush has been arguing along somewhat similar lines.


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