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Obama will propose mandatory tax on US companies' earnings held overseas
White House to unveil budget on Monday and predicts one-off 14% tax on corporations will raise $238bn to inject into project to upgrade roads and bridges
Barack Obama will propose a major clampdown on US corporations with a one-off levy on an estimated $2tn of untaxed earnings being stashed overseas, using the windfall to rescue America’s crumbling road infrastructure.
The centrepiece of the White House budget, which will be unveiled on Monday but was shared in advance with the Guardian and other media, is a one-off 14% tax on untaxed foreign earnings multinational companies are shielding overseas.
That is less than half of the current 35% top tax rate for corporations. But the White House predicts the 14% tax will raise $238bn, a sum it wants to immediately inject into a nationwide project to upgrade roads, bridges and public transport.
“These investments would be paid for by closing tax loopholes as part of reforming the business tax rules to level the playing field and make sure everyone pays their fair share,” a White House official said, speaking on the condition of anonymity.
Major corporations such as Apple, Google and Microsoft have been avoiding the 35% corporation tax on earnings repatriated to America by stockpiling earnings overseas in low-tax jurisdictions such as Bermuda and Ireland.
The White House’s proposed one-off tax on companies with earnings overseas would be a “mandatory tax on previously untaxed foreign earnings, regardless of whether the earnings are repatriated”, the official said. In total, the White House plans to invest $478bn in road infrastructure over six years through the Highway Trust Fund, around half of which would be paid for from the one-off tax.
Republicans have signalled they are open to finding a way to tax earnings stored overseas by big corporations, and have explored similar ideas. They are also in favour of boosting money for road-building – one of the few areas of government spending they are willing to see increase.
In addition to the one-off levy to pay for infrastructure improvements, Obama will also call for a 19% corporation tax on all future earnings, the White House official said.
“After this initial payment, foreign earnings could be reinvested in the US without additional tax, which would level the playing field, and encourage firms to create jobs here at home,” the official said.
“The president’s proposal also includes other loophole closers that crack down on corporations that shift profits to tax havens to avoid paying their fair share or take advantage of so-called ‘inversions’ to avoid paying US taxes.”
The proposals will be contained in the president’s $4tn budget, to be unveiled at the Department of Homeland Security on Monday. The budget is effectively his administration’s wish list.
Much of Obama’s budget plan is likely to be shot down by Republican leaders, who now control both chambers of Congress and will call the shots on future legislation.
But the budget represents an opportunity for Obama, who wields a presidential veto, to draw lines in the sand ahead of tax-and-spend negotiations.
Following his populist State of the Union address last month, which was characterised by his opponents as a Robin Hood-style attack on wealth inequality, Obama is expected to offer an array of spending programmes and tax increases in his budget, to bring “middle-class economics into the 21st Century”.
While open to changes to overseas taxes for businesses, Obama’s Republican adversaries, who have the power to call the shots on fiscal legislation, are fiercely opposed to other aspects of the White House’s budget they believe would harm business or redistribute wealth.
Republican representative Paul Ryan, the new chairman of the tax-writing ways and means committee, said on Sunday his party was willing “to work with this administration to see if we can find common ground on certain aspects of tax reform”.
However, he dismissed Obama’s plan to shut a tax loophole that allows wealthy Americans to avoid paying high rates of inheritance tax by re-organising their estates through trust funds.
“What I think the president is trying to do here is to, again, exploit envy economics,” the Wisconsin congressman told NBC.
“This top-down redistribution doesn’t work,” he said. “It may make for good politics. It doesn’t make for good economic growth.”
Monday’s budget will be aimed at alleviating the tax burden on the middle classes, mostly through tax credits, while raising taxes on the very rich. The White House anticipates strong Republican opposition to some plans, such as an increase in the capital gains rate on couples making more than $500,000 per year, but expects it will be more difficult for the GOP to object to more equitable taxes on American companies storing their profits overseas.
However, there appears to be more room for discussion over the president’s one-off corporate “transition tax” on accumulated foreign profits.
The White House said it opposes “tax holidays” – proposed by senators such as Republican presidential hopeful Rand Paul – that would allow companiesto voluntarily pay a one-time tax on foreign earnings that are returned to the US at a rate as low as 6.5%.
White House to unveil budget on Monday and predicts one-off 14% tax on corporations will raise $238bn to inject into project to upgrade roads and bridges
Barack Obama will propose a major clampdown on US corporations with a one-off levy on an estimated $2tn of untaxed earnings being stashed overseas, using the windfall to rescue America’s crumbling road infrastructure.
The centrepiece of the White House budget, which will be unveiled on Monday but was shared in advance with the Guardian and other media, is a one-off 14% tax on untaxed foreign earnings multinational companies are shielding overseas.
That is less than half of the current 35% top tax rate for corporations. But the White House predicts the 14% tax will raise $238bn, a sum it wants to immediately inject into a nationwide project to upgrade roads, bridges and public transport.
“These investments would be paid for by closing tax loopholes as part of reforming the business tax rules to level the playing field and make sure everyone pays their fair share,” a White House official said, speaking on the condition of anonymity.
Major corporations such as Apple, Google and Microsoft have been avoiding the 35% corporation tax on earnings repatriated to America by stockpiling earnings overseas in low-tax jurisdictions such as Bermuda and Ireland.
The White House’s proposed one-off tax on companies with earnings overseas would be a “mandatory tax on previously untaxed foreign earnings, regardless of whether the earnings are repatriated”, the official said. In total, the White House plans to invest $478bn in road infrastructure over six years through the Highway Trust Fund, around half of which would be paid for from the one-off tax.
Republicans have signalled they are open to finding a way to tax earnings stored overseas by big corporations, and have explored similar ideas. They are also in favour of boosting money for road-building – one of the few areas of government spending they are willing to see increase.
In addition to the one-off levy to pay for infrastructure improvements, Obama will also call for a 19% corporation tax on all future earnings, the White House official said.
“After this initial payment, foreign earnings could be reinvested in the US without additional tax, which would level the playing field, and encourage firms to create jobs here at home,” the official said.
“The president’s proposal also includes other loophole closers that crack down on corporations that shift profits to tax havens to avoid paying their fair share or take advantage of so-called ‘inversions’ to avoid paying US taxes.”
The proposals will be contained in the president’s $4tn budget, to be unveiled at the Department of Homeland Security on Monday. The budget is effectively his administration’s wish list.
Much of Obama’s budget plan is likely to be shot down by Republican leaders, who now control both chambers of Congress and will call the shots on future legislation.
But the budget represents an opportunity for Obama, who wields a presidential veto, to draw lines in the sand ahead of tax-and-spend negotiations.
Following his populist State of the Union address last month, which was characterised by his opponents as a Robin Hood-style attack on wealth inequality, Obama is expected to offer an array of spending programmes and tax increases in his budget, to bring “middle-class economics into the 21st Century”.
While open to changes to overseas taxes for businesses, Obama’s Republican adversaries, who have the power to call the shots on fiscal legislation, are fiercely opposed to other aspects of the White House’s budget they believe would harm business or redistribute wealth.
Republican representative Paul Ryan, the new chairman of the tax-writing ways and means committee, said on Sunday his party was willing “to work with this administration to see if we can find common ground on certain aspects of tax reform”.
However, he dismissed Obama’s plan to shut a tax loophole that allows wealthy Americans to avoid paying high rates of inheritance tax by re-organising their estates through trust funds.
“What I think the president is trying to do here is to, again, exploit envy economics,” the Wisconsin congressman told NBC.
“This top-down redistribution doesn’t work,” he said. “It may make for good politics. It doesn’t make for good economic growth.”
Monday’s budget will be aimed at alleviating the tax burden on the middle classes, mostly through tax credits, while raising taxes on the very rich. The White House anticipates strong Republican opposition to some plans, such as an increase in the capital gains rate on couples making more than $500,000 per year, but expects it will be more difficult for the GOP to object to more equitable taxes on American companies storing their profits overseas.
However, there appears to be more room for discussion over the president’s one-off corporate “transition tax” on accumulated foreign profits.
The White House said it opposes “tax holidays” – proposed by senators such as Republican presidential hopeful Rand Paul – that would allow companiesto voluntarily pay a one-time tax on foreign earnings that are returned to the US at a rate as low as 6.5%.
This should be a good thread.
Corporate shills versus the normals. Ready? FIGHT!
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