Republican Paul Ryan's plan to create a Territorial Tax

This is the portion of THE ED SHOW with ED SCHULTZ on April 30, 2012 Monday about Paul Ryan's plan to create a Territorial Tax. It's a conversation between Ed Schultz and David Cay Johnson. BBB

Let`s turn to David Cay Johnston, Pulitzer Prize winning journalist and columnist for "Reuters," and author of the book "Free Lunch."

Boy, I tell you what, this would be a "Free Lunch." You got the right title there, David Cay. We know what these companies are doing. It`s been well documented. But what would this territorial tax do, which is in this Ryan Plan, which the Republicans voted on? Where would this take us?

DAVID CAY JOHNSTON, "REUTERS": Well, what it would encourage companies to do is to take all their intellectual property that they haven`t moved and anything else they can out of country, so that they earn a dollar here in the U.S. and they show it to their shareholders, and then they may magically send it to the Cayman Islands and it disappears to the IRS.

So even if they are making things here in the U.S., they`ll be able to move profits out of the country by having their intellectual property out of the country. Secondly, if they find a place that has similar rules, then you move the jobs offshore and you can still earn tax free profits.

SCHULTZ: This would really grease the skids for more outsourcing of jobs, would it not?

JOHNSTON: Absolutely, Ed. Here is the magic words you need to hear from somebody who really wants to reform the system. No more separate company accounting. That`s the phrase to remember. To the tax man, these companies are thousands of companies, not one company. So they have different tax rules.

But if they are treated as a single company -- no multiple company accounting, only single company accounting, then all of that game playing can stop.

SCHULTZ: This could rob the United States -- and I say rob. I think rob is the correct word here. You make a dollar on our soil with American workers, you got to pay tax on that profit. This, of course, in the Ryan Plan, the territorial tax, hasn`t gotten any attention whatsoever. We got to have a big discussion on it.

This is robbing the treasury. How damaging would this be?

JOHNSTON: It could be very devastating to us. Here is an interesting thing to think about, Ed. From 1961 to 2011 -- that`s half a century -- the amount of the economy -- the corporate income tax fell by 2.8 percentage points. It`s now only 1.2 percent of the economy. Social Security taxes went up by almost exactly the amount that the corporate income tax fell.

So it`s working people. It`s not executives. It`s not companies. It`s working people who have made up for the corporate income tax. Those guys` goal is to get it to zero.

SCHULTZ: Well, keep in mind, the Ryan Plan passed in the House. It will never see the light of day in the Senate. But this is where the Republicans want to go if they get power. They will go right down. This will grease the skids of the corporations. They will get their pockets lined with corporate donations.

This is how the game is going to work. Of course, Mitt Romney says, hey, he loves the Ryan Plan. He called it a marvelous budget, a marvelous plan. Now according to the Citizens for Tax Justice, the Ryan Plan would cut on the richest 10 percent and raise taxes on the bottom 90 percent, and reduce revenue by two trillion dollars over 10 years. Do you believe those numbers?

JOHNSTON: Oh, yes, absolutely. I did my own less sophisticated set of numbers and came up with a similar conclusion. This is a redistribution plan. Take from the many, give to the already rich. The Republicans, Ed, have told us that they know America`s economic problem. It is that the rich don`t have enough.

And they have a solution. They`re going to take it from working people and the poor and the disabled and the children, so the rich can have more and then everything will be great.

SCHULTZ: OK. So I don`t know how Paul Ryan could do any media interviews anywhere without being asked about the territorial tax. Because this is new and it`s in the budget. It`s in what they voted on. And obviously it`s something that could just hurt our economy and our treasury even more.

David Cay Johnston, you`re the best. Thank you.