Everybody seems most interested in talking about US taxation of multinational enterprise, so, bring it on!
As a law professor, I must start with a hypothetical: Sue is a leading heart surgeon. She went to college and med school on federally-guaranteed loans at schools that received considerable state and federal support. Her clinical work, internship, and residencies were at hospitals that received much government aid. After establishing herself at THE private clinic in New York, she decided to operate only in countries with “reasonable” malpractice laws.
In 2004, Sue received $1 million for surgeries performed in countries with no income tax. $2 million was earned for surgeries in Europe, which was taxed by the countries where the surgeries were performed at 50%. Her only other income was on investments held in an account in London. She is a US citizen and resides in Manhattan. If the US were to tax her, she would happily move to Geneva (where she has numerous personal and professional connections) permanently and renounce her US citizenship. (Remember, this is a hypothetical. Currently, the US would tax her, but little tax would be owed, because of the way that the US foreign tax credit works, which will be discussed in later posts)
How should the US tax her on her $3 million of 2004 surgery income? The pro-business, anti-tax right would say not at all, as taxation would drive her to Europe. More tomorrow.