Sherrod Brown’s Tax Math on GM Moving to Mexico


Professor Rebecca Kysar was quoted in a Washington Post article about the new U.S. tax law.

The announcement by General Motors that it will end production at its auto assembly plant in Lordstown, Ohio, has angered many politicians, including Brown. In an interview on CNN, he recounted a conversation with President Trump in which the senator informed him that there was a “50 percent coupon” embedded in the tax bill signed by the president in 2017. “He wasn’t really aware of that,” Brown said.


Under Brown’s reasoning, GM will have to pay only a 10.5 percent corporate tax in Mexico, compared with the 21 percent rate in the United States. But a reader wondered if this was really correct, given the corporate tax rate in Mexico is 30 percent.

The Congressional Budget Office, in an April report, noted that the interaction between various provisions in the tax law “may increase corporations’ incentive to locate tangible assets abroad.” Sullivan, in his own analysis of these provisions, wrote that “in most real-world cases that won’t happen.” It really depends on whether the foreign country has a low corporate tax rate and the product being made has low margins, such as nuts and bolts, he said. That particular situation might spur a company to place a factory overseas.


Other experts say that Congress missed an opportunity by enacting a minimum tax applied on a global tax rather than a per-country minimum tax. Rebecca Kysar, a law professor at Fordham University who has testified before Congress on the effect of the law, said the new law should not be judged against the old law, but on policies that could have been enacted instead. Now “companies can blend their low-taxed and high-taxed foreign income together, reducing or perhaps eliminating their U.S. minimum tax obligations,” she said. “If the minimum tax were imposed per country, then the company would pay no minimum tax in Mexico since it would credit the Mexican taxes against its U.S. income, but it would pay U.S. minimum tax on the tax-haven income.”


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