Daniel J. Mitchell
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The business pages are reporting that Chrysler will be fully owned by Fiat after that Italian company buys up remaining shares.

I don’t know what this means about the long-term viability of Chrysler, but we can say with great confidence that the company will be better off now that the parent company is headquartered outside the United States.

This is because Chrysler presumably no longer will be obliged to pay an extra layer of tax to the IRS on any foreign-source income.

Italy, unlike the United States, has a territorial tax system. This means companies are taxed only on income earned in Italy but there’s no effort to impose tax on income earned – and already subject to tax – in other nations.

Under America’s worldwide tax regime, by contrast, U.S.-domiciled companies must pay all applicable foreign taxes when earning money outside the United States – and then also put that income on their tax returns to the IRS!

And since the United States imposes the highest corporate income tax in the developed world and also ranks a dismal 94 out of 100 on a broader measure of corporate tax competitiveness, this obviously is not good for jobs and growth.

No wonder many American companies are re-domiciling in other countries!

Maybe the time has come to scrap the entire corporate income tax. That’s certainly a logical policy to follow based on a new study entitled, “Simulating the Elimination of the U.S. Corporate Income Tax.”

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Daniel J. Mitchell

Daniel J. Mitchell is a top expert on tax reform and supply-side tax policy at the Cato Institute.
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