Obama to crack down on business taxes
May 5, 2009 by Charlie
Filed under FairTax News
We all know if you raise taxes on corporations they will pass these taxes down to the taxpayers.
From MSNBC
WASHINGTON (AP) – President Barack Obama plans changes to tax policy certain to be unpopular with corporations with international divisions and individuals who use tax havens.
Obama’s two-part plan, which he is slated to unveil at the White House on Monday, also calls for 800 new federal tax agents to enforce the system.
The president’s proposal would eliminate some tax deductions for companies that earn profits in countries with low tax rates, as well as consider U.S. citizens who use tax havens in the Bahamas or Cayman Islands guilty of violating U.S. tax laws. If Obama wins congressional approval for the changes – and he faces a challenge on Capitol Hill – it could deliver $210 billion in tax revenue over the next decade.
Treasury Secretary Timothy Geithner was to join Obama for the 11 a.m. comments.
Officials described the administration’s plan ahead of the announcement on the condition of anonymity so they wouldn’t upstage the president’s remarks. However, they acknowledged the political challenges facing the plan. The administration won’t seek a complete repeal of overseas tax benefits and, although the rule changes are narrower than some anticipated, business leaders still oppose them as a tax hike. Obama aides countered that the plan is a step toward a massive overhaul of international financial regulations the president has promised.In exchange, Obama said he was willing to make permanent a research tax credit that was to expire at the end of the year and is popular with businesses. Officials estimate that making the tax credits permanent would cost taxpayers $74.5 billion over the next decade.But administration aides said 75 percent of those tax credits paid workers’ wages; given the struggling economy, aides were reluctant to do anything that could add more Americans to the unemployment rolls.
It was small comfort. Companies who shelter profits in international accounts stand to lose billions if Obama’s plan becomes law. Under the existing regulation, those companies pay taxes only if they bring the profits back to the U.S. If they keep the profits offshore, they can defer paying taxes indefinitely – and many do.
Obama’s plan wouldn’t go into effect until 2011; Obama has said he does not want to tinker with tax revenues until his $787 billion stimulus plan has run its course. The proposals, however, were far from complete, and aides said this was just one piece of the administration’s plan for sweeping overhaul.
First up: Companies won’t be able to write-off domestic expenses for generating profits abroad. For instance, administrative tasks performed in New York for a London office would not be tax deductible in the United States.
Administration officials depicted the move as a way to close unfair tax loopholes that encouraged companies to send jobs overseas. They argued that if it costs the same amount to do business in, say, Ireland as in Iowa, why not do it entirely in Des Moines? Officials said Obama would characterize the move as a way to keep jobs in the United States and fight a system that is rigged against U.S. companies who keep their entire business operation domestic.
Obama also planned to ask Congress to crack down on tax havens and implement a major shift in the way courts view guilt. Under Obama’s proposal, Americans would have to prove they were not breaking U.S. tax laws by sending money to banks that don’t cooperate with tax officials. It essentially would reverse the long-held assumption of innocence in U.S. courts.
If financial institutions cooperate with Washington and disclose details when asked, Americans could invest anywhere they like.
Obama officials also said they would close a Clinton-era provision that would cost $87 billion over the next decade by letting U.S. companies “check the box” and treat international subsidiaries as mere branch offices. Officials said it was meant as a paperwork shortcut that is now a widely used and perfectly legal way to avoid paying billions in taxes on international operations.
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On the Net: http://www.whitehouse.gov
Rather than crack down on tax havens, as the Obama Administration announced it would do on May 4, 2009, we could do better if we, ourselves, were to become the world’s tax haven. And there is a bill in Congress to do just that – The Fair Tax Act of 2009, HR25, S296.
The Obama Administration proposes a series of measures to eliminate deductions for companies that take jobs overseas, combined with reforming the tax credit system. But with 70,000 pages of tax statutes, regulations and revenue rulings, the closing of one loophole necessarily results in the opening of another. The Administration is overly sanguine that adding 800 revenue agents will be enough do the policing job that its proposal would require.
The FairTax, on the other hand, while being fairer to low-income people than today’s tax code, eliminates all taxes on business and investment and repatriates dollars voluntarily. The FairTax replaces payroll taxes, estate, gift and generation-skipping taxes, and corporate and personal income taxes with a national retail sales tax on consumption of all new property and services -except education – once and only once. A rebate to all households with valid social security numbers for tax on consumption for essentials assures the tax is fair to low-income families. Millions of dollars of research say the tax will fully fund the federal government at current real spending levels.
The FairTax would bring trillions of dollars of offshore capital back to the United States in months – without hiring any more revenue agents. The repatriation would be free of federal compulsion.
The Obama Administration needs to rethink its approach.