Obama admin takes on challenges
Published 10:05 pm Tuesday, May 19, 2009
The administration of President Barack Obama certainly doesn’t shy away from taking on tough challenges. It jumped in last week by announcing a far-reaching program to raise $210 billion by cracking down on overseas tax avoidance and tax evasion.
Moreover, Obama said this newest tax initiative was “a down payment on the larger tax reform we need to make our tax system simpler and fairer and more efficient. “ Perhaps for tactical reasons the president began his drive for larger tax reform by taking on entities for whom the general public has little sympathy, multinational corporations that legally game the system to avoid taxes — the White House says that because of various breaks and credits the effective tax rate on U.S.-based multinationals is 2.3 percent — and wealthy individuals who evade taxes by hiding their money in offshore tax havens.
The Obama administration, in fact, resorted to starkly populist language, and all but labeled some global companies as tax evaders.
The biggest single change the president is proposing is to change the laws that allow businesses to take immediate deductions for investments in their overseas operations but defer paying taxes on the profits from those operations until the profits are repatriated to the U.S. An estimated $700 billion in deferred profits is parked overseas.
The Obama administration says this break encourages companies to invest overseas at the expense of investing in the U.S.
Part of the money, about $74.5 billion, recouped from tightening overseas tax loopholes, would go toward permanently extending the research tax credit. And here Obama is likely to learn a lesson in the politics of taxation: The research and development (R&D) tax credit has never been made permanent because Congress scores points by regularly extending it.
The Internal Revenue Service only enforces them.
—The Knoxville News-Sentinel