Tuesday, May 5, 2009

Obama Calls for Curbs on Offshore Tax Havens

President Obama said some companies and rich people were “shirking.”

Proposals to Curb Offshore Corporate Tax Havens
Obama Plan Leaves One Path to Lower Taxes Wide Open (May 5, 2009)

President Obama on Monday called for curbing offshore tax havens and corporate tax breaks to collect billions of dollars more from multinational companies and wealthy individuals. The move would appeal to growing populist anger among taxpayers but is likely to open an epic battle with some major powers in American commerce.

The battle will be joined.

The proposals would especially hit pharmaceutical, technology, financial and consumer goods companies — among them Goldman Sachs, Microsoft, Pfizer and Procter & Gamble — that have major overseas operations or subsidiaries in tax havens like the Cayman Islands.

They have some of the mightiest lobbying armies in Washington, as well as influential patrons in Congress. That combination will test Mr. Obama’s ability to stand up to powerful interests and marshal support among lawmakers at the same time that he is trying to win passage of major health and energy measures.

And it will be a battle royale, indeed.

Economists are divided over whether higher taxes would give corporations incentives to move jobs overseas or impair economic growth at home. In the coming debate, both Mr. Obama and the business lobby will claim that their way will save jobs.

The corporate argument is nonsense, but their lobbying prowess has always won the battle,

The top corporate tax rate is 35 percent, but the Treasury Department estimated that in 2004, the most recent year for which data is available, American multinationals paid $16 billion in taxes on $700 billion in foreign income — an effective rate of 2.3 percent.

They do have a counter-argument, of course.

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