Clinton Ad Backs Taxing Foreign Firms

Arkansas Gov. Bill Clinton’s campaign released a new television ad Thursday criticizing President Bush’s stand on taxation of foreign corporations operating in the United States.

The 30-second ad was intended for selected markets rather than national release. The campaign declined to say exactly where the ads will run, but it presumably will be in so-called “battleground” states where the contest is closest. An analysis:

The Ad: The spot begins with the statement: “This is the $825-billion question.” As the viewer sees foreign cars being unloaded from a ship, a narrator says that represents the revenues of foreign corporations operating in the United States each year. But 72% of them did not pay a dime in taxes, the narrator says as a dime rolls across the screen. “George Bush supports tax loopholes for foreign companies operating here,” the narrator continues as Bush is shown speaking. “Supports them so much that he attacks Bill Clinton for wanting to close them.”

With Clinton on the screen, the ad closes by saying: “Bill Clinton wants to collect what foreign corporations owe and put the money to work to rebuild America.”

Analysis: The ad’s figures are correct on revenues of foreign corporations and their reported tax liability, but misleading in its implication that tens of billions of dollars in taxes could be collected easily by the U.S. government from the foreign-owned companies.

The charge that Bush supports “tax loopholes” for foreign firms employs a loaded word, but it is true that the President strongly attacked Clinton’s proposal to toughen tax enforcement in hopes of raising $45 billion over the next four years from this source.

Congressional experts and private economists agree that stricter enforcement might yield some additional revenue--perhaps $1 billion a year--but regard Clinton’s estimate as exaggerated.

Bush has argued that such a crackdown would destroy American jobs, prompt retaliation against American firms and dry up foreign investment in this country. For at least two years, however, the Internal Revenue Service has been using broader powers granted by Congress in 1989 to inspect the books of foreign-owned firms operating in the United States to see if they are avoiding taxes.

Tax law experts say that it is very difficult to discover the size of profits and tax liability in firms that operate internationally. The IRS has said it cannot estimate how much taxes are owed to the U.S. Treasury by these foreign-owned companies.