FOIA on Martin Luther King

Read from the scan by GLM-OCR; expect the odd misread word.

## International Investment Activities of Multinational Companies

These figures, and other results of the survey, lead to one major conclusion: That the international investment activities of these representative multinational companies played an important role in their rapid export growth and consequently made a major positive contribution to their domestic and I emphasize the word domestic - sales, investment and employment growth.

## Double Taxation

I have tried to speak in familiar language; so I have some misgivings about discussing the issue of taxes. But the tax issue is an important one, and I'd like to cover some specific areas which are coming more and more into public'discussion.

At issue is the section of U.S. tax law which allows American corporations a tax credit for the income taxes they pay to foreign countries on income earned in such countries. The purpose of this tax credit is to avoid taxing the foreign earnings of U.S. corporations twice once in a foreign country and again when the earnings are remitted to the United States.

Opponents of this tax credit argue that since domestic firms are not allowed a federal tax credit for the state taxes they pay, the current method of taxing income from foreign sources is inconsistent with the way domestic income is taxed.

## Taxation by U.S. States

A major fallacy in this argument is that it is based on the incorrect assumption that the taxation of domestic income by city, state and the federal government is analogous to the United States taxing the foreign earnings of American subsidiaries which have already been taxed by the host country.

The proper analogy is between the way states treat corporate income earned in two or more states and the way the U.S. government treats income earned in two or more countries. Every state which has a state income tax provides a method of allocating the income of a multi-state company among the various states in order to avoid duplicate taxation of the same income. As a matter of fact, the constitution requires this. Thus the current methods of taxing foreign and domestic income are consistent.

Further, where one domestic corporation in the United States has an ownership position in another domestic corporation, the federal income tax law quite properly prevents duplication of corporate income taxes. The parent company is taxed on earnings of the owned company only when such earnings are distributed as a dividend and then at no more than a nominal rate. What logic can there be in the Burke-Hartke proposal that earnings of an overseas subsidiary in most cases earnings already taxed in the foreign country at rates comparable to or higher than U.S. rates should be immediately retaxed at full U.S. income tax rates?

## International Competition by American Industry

Another fundamental element of the issue is the tax credit's relationship to the ability of American industry to compete internationally. According to a recent survey by the National Association of Manufacturers, if the United States were to repeal the tax

credit for foreign taxes paid and tax all foreign subsidiary income before it is paid out in dividends to the parent company, U.S. firms with foreign operations would be forced to pay an average effective tax on their foreign earnings of over 70 per cent.

Given this added tax handicap, few American firms could continue to compete with foreign-controlled companies for world markets.

You can appreciate how useful it is to have these facts for presentation where contradictory allegations are being made. Let's keep the record straight!

Also useful to the undertaking on which we must all embark is the factual story of what imports and exports do, beneficially to create jobs.

## Imports Produce One Million U.S. Jobs

Labor Department figures document the finding that one million jobs in the United States are dependent on imports - jobs for food processors, ship and dock workers, truck drivers and railroaders, warehouse employees and retail clerks. And it's equally impressive to consider that every billion dollars worth of exports creates 60-to-80,000 jobs in the United States.

As we assess the situation, let us not forget the dilemma our government faced in August 1971. As Mr. Peter Peterson wrote, the New Economic Policy announced that month was not, and I quote, "a one-shot reaction to a one-time crisis. It marked the beginning of a new era of more flexible, enduring, and viable economic relationships among nations. The years behind us were by and large an era of success, but an era based upon a system which had become outgrown, outworn and increasingly crisis-prone."

## Tariffs and Free Trade

Mr. Peterson was referring to the tremendous impact that international trade and monetary factors were having on our people. We have since come to learn the difficulty of achieving universally approved corrective action. And now we must reckon with this reality: U.S. negotiators are preparing to enter economic talks next fall that could shape future international relationships for many years to come. Our government can and should strive in these talks to put an end to present attitudes and trends that point ominously to another "balkanization" of world trade.

It can and should seek agreement to reduce, and if possible end, all tariffs on industrial trade by the end of this century.

It can and should try to create far freer trade conditions for farm products.

It can and should seek the harmonization among nations of the present hodgepodge of non-tariff trade barriers and preferences.

But these objectives will remain forlorn hopes unless our negotiators can go into these hard bargaining sessions with the clear backing of the American people and their Congress. We must give them that.

## Spurring Internal Transition to Successful Competitive Enterprise

Meanwhile, we face and must do something about the undeniable tolls and grievances resulting from (please turn to page 23)