RECENT POSTS
- White House Study Looks at Job Creation in Illinois if Gitmo Prisoners Transferred There
- President Obama: Asia Trip Helped Usher in a New Era of American Engagement
- Secretary Sebelius Celebrates the Tenth Anniversary of National Adoption Day
- Organizing for America Targets Sarah Palin
- Obama Administration Starts to Publicly Raise Issue of Detained US Citizen Xue Feng
- President Obama Gives Interview (of Sorts) to Dissident Cuban Blogger
- "You Guys Make a Pretty Good Photo Op," President Obama Jokes to Troops at Osan Air Base
- Did the Chinese Government Crack Down on an Obama Interview?
- Our Trip to the DMZ
- President Obama Greets U.S. Troops in South Korea, Wraps Up Week in Asia
MONTHLY ARCHIVES
« Previous | Main | Next »
President Obama to Call for Tax Changes for Corporate Tax-Avoiders, Out-sourcers
May 04, 2009 6:00 AM
Jake Tapper, Sunlen Miller & Matt Jaffe report:
This morning, President Obama and Treasury Secretary Tim Geithner will announce that they are cracking down on tax laws that encourage corporations to send jobs overseas and allow the corporations to hide money in international tax shelters.
The announcement "reflects the realization of two commitments President Obama made during the campaign," a senior administration official told reporters in a conference call Sunday night.
Indeed, both moves were frequent campaign rhetoric from last year.
In Elko, Nevada, last September 16, then-Sen. Obama told voters, "I will stop giving tax breaks to corporations that ship jobs overseas, and I will start giving them to companies that create good jobs right here in America."
"You know there’s a building in the Cayman Islands that supposedly houses 18,000 corporations," then-Sen. Obama said in Indianapolis on October 23. "Think about that. That’s either the biggest building or the biggest tax scam in the world. I think we know which one it is."
In Abington, Virginia, on October 3, 2008, then-Sen. Obama said that his Republican opponent, Sen. John McCain, R-Ariz., "supports tax havens that let companies avoid paying taxes here in America – tax havens that cost $100 billion every year."
The Obama administration estimates their actual moves will bring significantly less than that estimate to the US Treasury, however -- a total of approximately $210 billion over the course of ten years.
The Obama administration argues that in 2004, the most recent year for which figures are available, U.S. multinational corporations paid approximately $16 billion in US taxes on approximately $700 billion of foreign active earnings -- an effective U.S. tax rate of 2.3%.
"We have a system that is in many ways broken and allows people to play games," a senior administration official said.
The tax changes would take effect in 2011, because the administration wants to wait until the recession has turned around.
President Obama and Secretary Geithner plan to remove tax deductions for companies that take jobs overseas, saving $60 billion from 2011 to 2018. Combined with reforming the foreign tax credit system, the total savings would be $103 billion, senior administration officials. The plan would also make permanent the research and experimentation tax credit, set to expire on December 31.
The second part of the plan tries to reduce the amount of taxes lost to tax havens either through loopholes in the law that allow companies to legally avoid paying billions in taxes or through the illegal use of hidden accounts by wealthy individuals, brining $95.2 billion over the next 10 years into Treasury's coffers.
Cracking Down on Tax Breaks for Outsourcing
The idea that companies that keep jobs in the US are disadvantaged in the tax code compared to those who invest in jobs overseas "has never made sense to this president," a senior administration official said.
The administration estimates it will eliminate $103.1 billion in tax advantages for investing overseas. That money will help pay to make permanent a tax credit for new innovation and investment within the U.S.
These savings will partly come from reforming corporate tax deferral rules so that companies cannot defer paying U.S. taxes on the profits from overseas investments while taking immediate deductions for expenses from those investments. This will not impact research and experimentation expenses that have significant spillover benefits to the United States, the administration says. Loopholes will be closed on laws that allow companies to use inflated tax credits for foreign taxes.
Going After UBS, Shutting Down Tax Havens
Regarding overseas tax havens, the Obama administration will crack down on the ability of U.S. companies to make their foreign subsidiaries vanish for tax purposes through "check the box" rules. Certain foreign subsidiaries would be considered as separate corporations for U.S. tax purposes, Obama administration officials say, raising $86.5 billion from 2011 to 2019.
It's "one of the most unjustified loopholes in our international corporate tax system," the senior administration official says. Companies exploiting it "are taking advantage of a bad law that needs to be repealed. It is indefensible."
Another area where the Obama administration hopes to crack down can be seen in a government lawsuit to force Switzerland's largest bank, UBS, to release the names of 52,000 American customers who may have money and investments hidden there. Swiss law does not consider tax evasion a crime, and bars such information from being shared.
In a $780 million settlement earlier this year, UBS admitted that its bankers helped Americans evade US taxes through tax havens in the British Virgin Islands, Hong Kong, and Panama, from 2000 to 2007.
The Obama administration says it will work harder to prevent these types of evasions by working with G-20 nations to impose sanctions on countries that do not turn over tax information, to impose stricter reporting standards for international investments, and to require foreign financial institutions to sign an agreement with the IRS to share as much information about their U.S. customers as do American financial institutions.
-- Jake Tapper, Sunlen Miller & Matt Jaffe
May 4, 2009 | Permalink | Share | User Comments (224)
You can follow this conversation by subscribing to the comment feed for this post.
In order to curb our ballooning budget deficit we have now turned to taxing our own multinationals. These U.S. firms will have a difficult time staying globally competitive if forced to pay taxes on foreign profits and this is primarily due to our monetary system being used as a printing press. The new tax plan may cause companies to move their business out of the U.S and deter new businesses from domiciling here. This plan will eliminate American jobs not create them.
Posted by: thevoice@voicedup.com | May 5, 2009 10:23:59 PM
Just like any virtue, the best mean is between extremes. For A and B, take governments competing with eachother or not. For C and D, take consumer benefit of cheap goods or consumer benefit of employment. For E and F take the extremes of outsourcing, which China has graciously shown us, and the extremes of socialism, where your life is pre-planned by the government and private ownership cannot extend beyond your front yard. Obviously, there is plenty of balancing that can be done, and plenty of ways to do it with caution. My only hope is that the plans and measurements of success are not being outsourced.
Posted by: MarkLeavenworth | May 5, 2009 2:10:33 PM
Look, either we have a global economy in which corporations are free to create jobs where they want to -- or we don't. Make up your alleged mind.
Lower the tax rates in the U.S. and jobs will return.
Posted by: tanarg | May 5, 2009 6:05:32 AM
"Also, Taxes are a small part of companies sending jobs overseas. The real root problem is the cost of manufacturing in the U.S. is ridiculous due to the EPA, OSHA, DEP, unions, lawyers, medical insurance, etc. China and most of the third world have none of this to deal with and they pay employees pennies a day."
Right wingers are apparently upset that Americans wish to work for a decent wage in non dangerous working conditions.
Posted by: Ryan C | May 4, 2009 6:22:41 PM
"The man is doing exactly what he said he was going to do during the campaign and he's boxed the Republicans into a corner."
Exactly.
Posted by: Ryan C | May 4, 2009 6:21:39 PM
Doris,
Sorry, I see Keith is a flaming liberal that blindly follows a president that no one knows anything about. When Obama finishes his "change" we will be the largest Socialist Republic in the western hemisphere.
Also, Taxes are a small part of companies sending jobs overseas. The real root problem is the cost of manufacturing in the U.S. is ridiculous due to the EPA, OSHA, DEP, unions, lawyers, medical insurance, etc. China and most of the third world have none of this to deal with and they pay employees pennies a day. I personally know small business owners that have their engine components made in China at a fraction of the cost of the ones I produce here at home.
Posted by: Robert Weathers | May 4, 2009 5:11:44 PM
This is one of he most laughable things coming from from THIS administration. Who would buy what they are saying for one minute.
Posted by: jeff | May 4, 2009 5:03:42 PM
Try the Truth,
The proof is that it is now legal to evade Federal Income Taxes if you are a high ranking democrat in Washington. If you are fortunate enough to be named to an Obama cabinet post, you can quietly pay your taxes and move into a good, high paying job in the White House. The one time in my life that I was late paying a large tax bill ($89,900.00), the IRS told me they would garnish my wages to the tune of 94.54% until it was paid in full. Why do the same rules not apply to nearly every member of Obama's cabinet?
Posted by: Robert Weathers | May 4, 2009 4:55:54 PM
Robert Weathers: This is Doris...I totally agree with you. Obama is cleaning up Washington is a comment by Keith....
***************************************
Change is slow and painful. Obama is cleaning up washington.
Posted by: keith | May 4, 2009 1:45:25 PM
=====================================
"Obama is cleaning up Washington",
and
I might add, while cleaning he is sweeping America under the rug.
Posted by: Doris | May 4, 2009 3:00:10 PM
====================================
Doris,
Quite the contrary, Obama is not cleaning up Washington, he is making it dirtier with his Chicago grime. Him cleaning up Washington could be likened to washing your clothes in mud!
Posted by: Robert Weathers | May 4, 2009 3:30:28 PM
Posted by: Doris | May 4, 2009 4:51:57 PM
I wonder if Obama will ever go after tax cheats in the demographics that actually voted for him.. say going after cash only and unregistered businesses? Maybe if we all paid taxes on what we earned (all earnings and gains), we wouldn't need to worry about balancing the budget.
Posted by: DontGet818OnMeNow | May 4, 2009 4:13:27 PM
Quite the contrary, Obama is not cleaning up Washington, he is making it dirtier with his Chicago grime. Him cleaning up Washington could be likened to washing your clothes in mud!Robert Weathers--
---------------------
Same question I asked an earlier poster, please post the proof and appropriate links to support those comments. I'll wait, thanks in advance!
Posted by: try the truth | May 4, 2009 3:34:58 PM
There has never been a better time for the FAIR TAX! The Secretary of the Treasury can't even figure out how to pay his taxes (until he gets nominated for an Obama cabinet post).
Posted by: Robert Weathers | May 4, 2009 3:32:36 PM
Doris,
Quite the contrary, Obama is not cleaning up Washington, he is making it dirtier with his Chicago grime. Him cleaning up Washington could be likened to washing your clothes in mud!
Posted by: Robert Weathers | May 4, 2009 3:30:28 PM
Just referring to waiving public financing and the Acorn deal.. the first being an Obama 180 degree turn, the second well, it's of course arguable.
I said unethical, IMHO. They are too smart to do anything knowingly illegal.
Thanks for calling me on this.. glad someone pays attention.. critical observation would be welcome in the current political environment.
Posted by: DontGet818OnMeNow | May 4, 2009 3:28:44 PM
===The man is doing exactly what he said he was going to do during the campaign and he's boxed the Republicans into a corner. ===
This is true. Except I would say he is doing exactly what he said he was going to do during the primaries. During the general, he stopped on a dime and ran as a centrist. He won't get to do that again, but it worked this time around.
Posted by: Axey | May 4, 2009 3:18:11 PM
They are so dirty, yet they want to point fingers at other people.. doing something just slightly more or less unethical than themselves..: DontGet818OnMeNow
-------------------------
Would you mind posting proof and links that support your above statements? I'll wait. Thanks in advance!
Posted by: try the truth | May 4, 2009 3:10:43 PM
If the administration wants to fix a system that is broken and allows people to play games.. try looking at how they got elected, how they avoided campaign finance reform, how they financed biased voter registration dot orgs..
They are so dirty, yet they want to point fingers at other people.. doing something just slightly more or less unethical than themselves..
Posted by: DontGet818OnMeNow | May 4, 2009 3:06:02 PM
Change is slow and painful. Obama is cleaning up washington.
Posted by: keith | May 4, 2009 1:45:25 PM
=====================================
"Obama is cleaning up Washington",
and
I might add, while cleaning he is sweeping America under the rug.
Posted by: Doris | May 4, 2009 3:00:10 PM
The man is doing exactly what he said he was going to do during the campaign and he's boxed the Republicans into a corner. It will be fascinating to watch them defend off-share tax havens while the rest of us are struggling to get by and still paying our taxes. Good on him.
Posted by: Brooklyn Democrat | May 4, 2009 2:38:17 PM
===Axey,
exactly. So are you Social security be abolished? You righties are nuts!===
Not sure what you are asking me. If it is should social security be abolished, the answer is probably. It is going to go the way of the do-do bird anyway.
Posted by: Axey | May 4, 2009 2:11:24 PM
Post a comment
