The Huffington Post today displayed the most-US centric view of tax policy yet. It’s alarmed that investors from abroad are not volunteering to pay multiple layers of US income tax on the same investment. Here in Cayman, we don’t mind paying sales taxes during our annual shopping trip to Miami. There’s only so much you can find on a small island. But we don’t think investing in the US via Cayman should require two layers of US tax.
The Huffington Post and Citizens for Tax Justice, a US labor union-backed pressure group in Washington, are claiming that Mitt Romney helped foreign investors escape US taxes by setting up investment funds in Cayman. In their haste to criticize Romney, they don’t mention that the US business to which the foreign investors are contributing their capital is subject to US corporate income and payroll taxes, regardless of who owns them.
Having borne this business-level tax, these foreign investors do not want to pay three levels of tax on their investment earnings by having a U.S. investor income tax imposed on top of their home country income taxes and the business-level tax. Cayman Island entities simply provide a tax neutral platform so that investors from abroad can pool their resources to give US businesses the capital they need to hire and grow, without being subject to additional layers of US income taxation, plus the investor’s home country tax.
Foreign investment in the US should be encouraged, not criticized. Saying Mitt Romney is un-American for helping foreign companies hire American workers is simply misinformed. The Organization for International Investment, a US trade organization based in Washington, reports that US subsidiaries of foreign companies contribute $2 trillion to the US economy, accounting for 21 million jobs. Whether via Cayman or other nations, this investment helps put food on the table for many American families. Let’s hope that as the US Presidential campaign continues journalists start learning the facts, instead of just making up attacks.