President Barack Obama announced Monday that he intends to obtain extra taxes from overseas US corporations as part of his $3.99 trillion budget for 2016. It is apparently only the beginning of his larger scheme to increase taxes on the rich, and help “hard-working families get ahead in a time of relentless economic and technological change.”
The corporate tax rate is currently 35%, but many American companies often skirt these taxes by classifying themselves as “indefinitely” invested abroad. Obama hopes to close this loophole with two possible proposals.
He firstly calls for a one-time 14% tax on the $2.1 trillion of profits that corporate giants like Apple, General Electric and Pfizer have hidden away outside of America.
“This transition tax would mean that companies have to pay U.S. tax right now on the $2 trillion they already have overseas, rather than being able to delay paying any U.S. tax indefinitely,” a White House official told Al-Jazeera recently.
On top of that, he will also ask for a 19% tax on U.S. companies’ future overseas earnings, which will, it is claimed, pull in $238 billion to fund the Highway Trust Fund, hopefully to repair America’s crumbling infrastructure.
I would like to point out four points that often go unnoticed in these one-way debates: first, many American companies really do make most of their profits overseas. These corporations already pay taxes once to their foreign hosts, and are taxed on their earnings from Americans.
Similarly, foreign companies in America already pay taxes on any revenue earned here; it might be slightly unreasonable to expect them to repay their country of origin as well. I think some Americans might take issue if 19% of American consumer spending ended up in China, Russia, France or Germany.
Second, I think we should focus on what else he intends to do with the cash he hopes to obtain; the 14% tax on the old cash hoard of 2.1 trillion would create 294 billion dollars on its own, far exceeding the highway budget, and if you throw in the 63 billion dollars required for free college and STEM programs, we are nearly entirely covered. The 19% additional yearly tax is very substantial indeed. Would this be used to pay down the ginormous debt, or to fund yet more foreign entanglements?
Third, what if American corporations abroad simply Refuse to pay? Or worse, what if they renounce their “citizenship”?
Fourth, these taxes are not on the richest Americans, though they will have some impact on those who work for/ own shares of the corporations.
Now, I reckon corporatization is a horrible thing, and the obscene profits they make are squeezed out of the blood, sweat and tears of entire countries. However, they already have to pay back some of the said blood sweat and tears earned overseas back to the governments of these countries.
The additional American tax burden would likely be shared by both the corporation and the local populace via increased prices of stuff produced by the corporation. Should America take a slice of another country’s people? A controversial concept, if ever there was one, when worded properly. On the plus side, or negative side depending on how you see it, it is likely that local companies in other nations would have a competitive advantage and perhaps give corporations (from America anyway) a bit of a fight. Unless, of course, the corporations happen to be monopolies. But I digress.
Obama’s budget still has to be approved by a Republican-controlled Congress. As such, it is “unlikely to become law,” according to Reuters. Most top-level Republicans would not support taxing the rich (particularly the top 0.1%).
On Sunday’s “Meet the Press” the Republican Party’s tax writer, Paul Ryan, said: “What I think the president is trying to do here is to, again, exploit envy economics,” adding that “top-down redistribution doesn’t work.”
Sen. John McCain had even declared Obama’s tax plan “DOA.”
The president stood his ground though, telling NBC Today host Savannah Guthrie that his “job is to present the right ideas, and if the Republicans think they have better ideas, then they should present them,” according to USA Today. “But my job is not to trim my sails.”
Obama’s new budget intends to allocate $3 billion to STEM programs, while $60 billion would go toward his proposed free community college. As I had Mentioned before, he also aims to ease automatic cuts on military programs.
Err the problem I have with this is why should the gov’t feel it should take more money because of what it’s spending, if anything they should be lowering the budget and tax. however we’re all human and so are politicians driven by self gain…. thus the only reason this is happening is because the people making the decision have something to gain , Obama is getting a lot of scrutiny as a result of the growing debt, this is most likely an attempt to rectify this and rehabilitate his reputation perhaps he even fantasises going down as the president that took the power from corporations, anyways these companies are avoiding tax , especially apple, while the rest of us are paying gst on their products and paying income tax. i say do it 🙂
Opinions are like @$$h0les Everyone’s got one. Spending time writing about where corporate profits came from, how they were taxed and in what way they are tucked away seems like a waste of all of our time. Let mcdonalds get taxed to the hilt. Why should we not repair our infrastructure which will cost somewhere in the 3 trillion dollar range. The only individuals who gain from corporate profits are share holders. As far as I am concerned corporations are nothing more than tools that should provide for the public well being or be dismembered for being more or less useless to improving the human condition. If corp. Are hiding money why should we care if the govt. Taxes the hell out of it. As a employee of corporations I have always had a negative experience withthem, cutting benefits to increase margins. They care nothing for me, my family or my plight. I see no point in wasting any time whatsoever in protecting them. Corporations will always act in their own self interest including working behind the scenes to manipulate tax laws. There’s nothing wrong with the pres. Bring the pendulum back the other way.
Black Roosevelt. Awesome. He’s doing something right, right now.
Black Roosevelt! He’s doing the right thing at the right moment. We welcome their hatred indeed….Light ’em up.
Amazing thing about taxes: When you do the research and really dig in, – what you thought you knew turns out to be how you were being screwed. What does a former IRS CID agent have to say about his 2 year research into the “income tax”? It will blow your mind! http://FreedomAboveFortune.com
Nothing to say about central banks and the misery they deal millions every day. Most of the evil done in this world can all be traced back to central banks and their lending practices. They fuel the perpetual war machine.
Google: Rothschild Timeline
I can understand frustration that we all feel. Its true corporations are taxed about 33% or whatever. Problem is that corporations take advantage of tax code that was meant to help create jobs. Then they create companies that only exist on paper or have a small office in the Cayman Islands that they move money into then out. What Obama should be doing is tightening up the tax code, close the loop holes. Close the write offs.
CoNN, I have to disagree on several points you raised here.
1) The funds those companies have abroad have largely been run through a network of tax avoiding corporations. Lots of countries have different sorts of profits which will not be taxed at all or only very little. These funds are then parked outside the US fiscal reach. Profits can also be reduced artificially. For example, some companies own aircraft. Those aircraft are then ‘sold’ to a subsiduary which in turn is located in a tax haven. The partent company will then be charged by the subsiduary for using those aircraft. Whether or not they were actually used. Mind you that this is absolutely legal, sadly.
I just want to point out that few of the profits large international companies make are really taxed (except for VAT probably).
2) While you are (probably) correct that companies do pay taxes for their revenues, the tax you are writing about is on profits.
3) Companies already use juristical constructions made to reduce the money they pay to any country. Technically speaking, those corporations have their nominal headquarters in some tax haven while the actual work might be done in the USA. The same problem applies not to only to companies in the USA but also to those in Europe etc. Whenever someone is making a lot of money he will try to reduce his tax burden. To avoid this there is little other way than to raise the same taxes everywhere. Sadly, this will hardly be possible as long as countries compete against each other rather than against the 0.1% richest people.
More information: http://www.offshore-leaks.org/