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Wednesday, Dec 6, 2023

Congressional Plans Are A Threat to California Businesses at Home, Abroad

By Greg Lippe It is often said that if California were an independent state, we would have one of the top ten economies in the world. A stunning array of products developed and manufactured in California reaches markets in every corner of the globe. Yet with all of our output, California’s economy is inextricably tied to tax and trade policies established in Washington, D.C. And now that tie could be the source of yet more economic pain in the Golden State. Some members of Congress are supporting a plan to impose $200 billion in new taxes over the next 10 years from global American companies. Worse, the proposed tax increase would hurt our businesses’ ability to compete in foreign nations and access emerging markets around the world. With the exception of just a few developed countries, such as South Korea and Ireland, only the U.S. taxes its own businesses for revenues earned overseas. The United Kingdom and Japan recently eliminated taxes on most overseas revenues of their nations’ companies to enable them to compete on a level playing field. Because our nation’s tax system inherently disadvantages American businesses operating abroad, the U.S. has long permitted companies to reinvest and reallocate overseas revenues to remain competitive. This policy has enabled U.S. businesses to succeed in highly competitive international markets against foreign rivals. The success of U.S. companies abroad brings substantial benefits to California and the United States. Operations overseas are supported by executive, administrative, engineering, manufacturing and other jobs in the U.S. According to the California Council for International Trade, fully one-quarter of California’s economy is linked to international-related commerce. In the Valley, one of our local manufacturers Bobrick Washroom Equipment provides a great example. Now more than a century old, Bobrick maintains headquarters and its main plant in North Hollywood. While the company achieved early success in the U.S. selling to the railroad industry, to sustain growth it had to look beyond our nation’s borders. Today, Bobrick International is active in Europe, Australia, Latin America, Asia and the Middle East. The company’s operations in the Valley would be significantly smaller if it weren’t for the opportunities provided by foreign markets. After all, 95 percent of the world’s population lives outside the U.S. Furthermore, manufacturing companies such as Bobrick that export their products support a range of other industries, such as shipping, insurance, finance, logistics and warehousing. California’s location on the Pacific, our rich natural resources, our investment in higher education and our multicultural heritage, position our state to succeed over the long term in the global economy. That success should not be hampered by a tax policy that singles out overseas sales. All of our nation’s businesses should be encouraged to find new growth abroad which supports jobs here at home. Instead, Congress is considering enacting a tax policy that cuts into investment dollars and disadvantages American businesses against foreign rivals. California’s influential Congressional delegation should take a bipartisan stand against a tax plan that will disproportionally hurt our state. Greg Lippe is Chair of the Valley Industry and Commerce Association (VICA) and managing partner of the CPA firm Lippe, Hellie, Hoffer & Allison, LLP.

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