Posted on 05/04/2009 5:24:34 AM PDT by SeekAndFind
WASHINGTON (Reuters) - President Barack Obama on Monday will propose changing provisions in the tax code that he says encourage U.S. companies to move jobs overseas, as part of a broader package aimed at saving $210 billion over 10 years.
Obama will seek to follow through on a campaign promise to change the tax treatment of American firms with overseas operations.
That portion of his plan -- opposed by such firms as Pfizer Inc and Oracle Corp -- would raise more than $100 billion in revenue over the next decade.
Obama vowed in a February address to the U.S. Congress to make the tax code more fair by "finally ending the tax breaks for corporations that ship our jobs overseas."
Currently, U.S. firms are allowed to defer paying taxes on profits earned overseas if they plow those profits back into their foreign subsidiaries.
Critics say those rules encourage businesses to bolster their foreign operations instead of creating jobs at home.
But an array of firms signed onto a letter to congressional leaders in March opposing changes to the so-called deferral provision, saying they would make U.S. businesses less competitive.
The letter was signed by 200 companies and trade associations, including Pfizer, Oracle, Microsoft Corp Johnson & Johnson and General Electric Co as well as the Business Roundtable and the U.S. Chamber of Commerce.
The letter said the firms would not be on a level playing field with international rivals, many of which are not required to pay taxes at home on overseas entities.
Senior U.S. officials who described Obama's plans said they were balanced and would not put excessive burdens on firms.
NO MORE DEDUCTING EXPENSES
A central provision would prohibit companies from deducting expenses supporting their overseas operations until they pay taxes on offshore profits.
(Excerpt) Read more at uk.reuters.com ...
If this puts a 100 billion dollars into the government coffers that means the consumer will be putting that hundred billion into those coffers.
I dont know much about economics, but I do know that.
Ultimately they may not, but corporations do pay taxes and then pass them on to the consumers. The US has one of the highest corporate tax rates in the world. If it gets too high, corporations go out of business or they relocate.
Leaner = Less employees = higher employment rate.
I meant higher unemployment rate.
That would pretty much be the plan.
The worse the economy gets, the more power they have.
Correct. It is like pruning a rose bush. Eventually, a leaner company can build on a stronger foundation, which then leads to increased employment. At least that’s the theory.
HA! What is he going to do for his “poor” supporters when they start losing their jobs. Fun sticking it to those evil corporations, isn’t it. Dumbasses.
B.S. No one will be around to pay those taxes. It's like saying that you'll raise the top rate to 99% and make a zillion dollars. These businesses will simply go under and be replaced by foreign businesses that will import the products as well.
Here is one possible consequence of this “money grab” by the gov’t—Shane, owner of Shane’s Pub in Cork, Ireland, reads about this proposed tax law change and immediately runs to the richest financier he can find. He asks for $XX billion to buy a US multinational company. Shane tells the financier he will be the new CEO of the corporation which will now be headquartered in Ireland. The payoff to the financier is in the high low tax rate arbitrage US to Ireland. A profitable corporation in the US has a net income vastly less than a profitable corporation in Ireland. With the signing of the check to buy the corporation, instant millions or billions of profits are created. The corporation is now an Irish corporation with operations in the US. Corporate taxes are paid in Ireland. The workers now report to Shane.
I just used Ireland as a fictional country with low corporate taxes but the principles are the same—this could lead to acquisitions of US MNC’s by people in low tax rate countries. It enables those countries an excellent opportunity to grow their corporate economies without having to undergo slow, costly organic growth.
Am I wrong? I would like a corporate/international finance expert’s opinion.
“saving $210 billion”
Don’t you love govt euphemisms about how obama will “save” money by taking it from us, and “invest” it by (way over) spending it on pork programs?
the stock market is on life support, when the powers-that-be no longer need to have it inflated they will flip the switch
everything is one big ponzi scheme now, a lot of the trading is being done by Goldman Sachs
and a huge proportion of the heaviest traded stocks are the stocks most heavily shorted
good luck
For every action there is a reaction. All things being equal capital is like water it will take the path of least resistance. This will not work as the government types have planned.
“The dems should have seen this coming”
It is a tactic of oppressive regimes to threaten the sources of money, including businesses, to motivate those sources to donate and support the regime. This is simply a way to motivate payoffs. You will probably see lobbying efforts that eventually water down or eliminate this threat of taxation. The political contributions to the leftists will go up, however. This is like a political fund drive campaign. This current gov’t wants to create the richest political movement in history. Intimidation and threats are effective fund raising techniques.
This is all typical leftist methodology. If you haven’t seen it before, well, now you are being familiarized with how a corrupt and oppressive regime operates.
Well, I haven’t seen it before. This is my first experience in living under an increasingly fascist dictatorship and I’m not liking it very much.
I had a conversation with one of my liberal friends before the election, and this idea came up then. He said companies should be taxed more heavily for doing business off shore, and my argument was that then they would just relocate. This apparently had not occurred to him. And this idea of massive payoffs had not occurred to me. Although it should have, with the recent Chrysler incident.
Interesting.
Now see what happens to the economy.
“...as part of a broader package aimed at saving $210 billion over 10 years.”
Oh, good. I was worried about that $12 trillion or whatever it is we’re scheduled to spend over the next decade, but if we’re saving $200 billion, everything’s fine.
This is long overdue, and will draw out both Democrat and Republican politicians who personally benefit from selling out US taxpayers.
Taxpayers should not be forced to subsidize and insure multi-national companies that move manufacturing and development overseas, to sell back into the US market, from which they have removed all their manufacturing and development jobs.
The market is up.
The condition and direction of the whole economy is dependent on the financial condition of the US consumers, which is dependent on those consumers having jobs -- jobs that provide disposable income; not subsistence level or less.
“Taxpayers should not be forced to subsidize and insure multi-national companies that move manufacturing and development overseas, to sell back into the US market, from which they have removed all their manufacturing and development jobs.”
I understand your point of view, but that is not all there is to it. US corporate tax rates are higher than almost all other foreign countries. Today, a US subsidiary in, say, Germany pays German taxes. Then the US parent company will pay US taxes when dividends move from overseas to the US. After this change, the German subsidiary would have to pay both German taxes and US taxes over and above that at the time of its operations. This would mean that the US subsidiary is at a competitive disadvantage to its competition.
For more analysis, see http://www.cato-at-liberty.org/2009/05/04/obama-offshore-tax-plan-will-cost-us-companies-business-and-jobs/
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