An Analysis of Obama's Trade Bill

Companies would probably be able to avoid the legislation's penalties.


Two British economists don't care for the Patriot Employer Act, a bill introduced last August by Barack Obama and several other Democrats. The legislation would provide a tax credit equal to 1 percent of taxable income to employers that meet a number of requirements, such as keeping steady the ratio of full-time workers in the United States to full-time workers outside the United States and maintaining their corporate headquarters here. (I notice that my old pals at the left-of-center Angry Bear site also don't seem to think much of the idea.) The critique of the Brits is as follows:

Companies ought to decide the location of their headquarters and their domestic and foreign employment levels without being subjected to fiscal incentives. It is also unenforceable. Foreign branches of domestic companies, whose workers count as employees of the parent, would be changed to subsidiaries, whose workers no longer count as employees of the parent. Companies ever headquartered in the United States would be sold to shell companies or shut down and immediately reopened with a different name and legal identity, headquartered abroad. Let Commerce Department lawyers try to use corporate DNA fingerprinting to determine the ancestry of these new corporations! Unfortunately, idiotic legislation that is unenforceable is not harmless—it breeds contempt for laws and institutions.