Obama Proposes One-Time Tax On $2 Trillion US Companies Hold Overseas

mrspoonsi writes with news about a new proposed tax on overseas profits to help pay for a $478 billion public works program of highway, bridge and transit upgrades. President Barack Obama's fiscal 2016 budget would impose a one-time 14 percent tax on some $2 trillion of untaxed foreign earnings accumulated by U.S. companies abroad and use that to fund infrastructure projects, a White House official said. The money also would be used to fill a projected shortfall in the Highway Trust Fund. "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," the official said. "Unlike a voluntary repatriation holiday, which the president opposes and which would lose revenue, the president's proposed transition tax is a one-time, mandatory tax on previously untaxed foreign earnings, regardless of whether the earnings are repatriated." In the future, the budget proposes that U.S. companies pay a 19 percent tax on all of their foreign earnings as they are earned, while a tax credit would be issued for foreign taxes paid, the official said.

Comments

Double Irish

[AmiMoJo]

This is clearly aimed at companies abusing the "Double Irish" system. Seems like the rate should be set much higher, so that companies are punished and lose more than they would if they did the right thing and repatriated profits and paid the normal tax rates on them.

Re:Double Irish

[modmans2ndcoming]

they could pull an Apple and issue bonds in the EU to raise money that can be repatriated to the US without taxation and then repay those bonds in Euros held over seas.

Re:Double Irish

[140Mandak262Jamuna]

Because corporations shield the shareholders from liability. It costs nothing to create a corporation. It costs nothing to create a series of corporations one owning other. It is easy to funnel all the assets, income one way and stop the liabilities from flowing along with the assets and income. Thus the tail end corporation will have all the liabilities without any asset to pay for. Corporations don't go to jail. We must tax the corporation for getting this special privilege of being able to do business without anyone having to go to jail.

When limited liability corporations were first proposed, the biggest opposition was due to, "If the corporation commits murder who goes to jail?". Corporations must be taxed, and then the dividends paid to the shareholders must be taxed again, and when the dividends are spent we will assess them sales taxes again, if the post-tax dividend is used to buy a home, we will tax the home year after year.

We have coddled the tax evaders and their apologists for far too long. Government can tax anything for any reason. We will use it to the fullest extent. Don't like it, go somewhere like Somalia and conduct your business. Good riddance.

Re:Double Irish

[N1AK]

if the profits were made in tax free countries, so be it.

A viewpoint that requires a special kind of stupidity in those who don't appreciate it is purely theoretical. Companies aren't making billions in tax free countries, they are making billions in countries with taxes and using loopholes to legally avoid paying the vast majority with the help of a select group of countries. Getting every country to stop supporting this kind of action is impossible, so America is changing the laws to make it pointless instead.

If you can find one example of an American company that is currently paying less than 19% tax on it's average foreign profits without using a convoluted trick like double Irish I'd be amazed, so feel free to share.

Re:Double Irish

[TFAFalcon]

But it seems companies are not doing it. They are just opening subsidiaries overseas and funneling all of their earnings to them. So why not force them to pay (just like everyone else) for the privilige of staying in the US?

If you don't want to pay taxes, then leave. Or stay and obey the law just like everyone else. And just think of the benefits if they do leave - the rest of the companies will no longer be forced compete against someone who skirts the rules and the US might even start making some sane decisions when it comes to IP.

Re:If they were balancing the federal budget

[rednip]

The biggest 'hole' in the federal budget is $200 billion dollars a year in unfunded Medicare costs, most of which is because of Medicare Advantage and Part D, both of which were passed with a partisan GOP vote without any funding save for new debt. Overall that largess has had America's future generation pump more than 2 trillions into today's GOP voting seniors. Sure paying off two trillion in debt isn't a bad idea, but that does nothing to plug the GOP debt hole in the first place. The best idea would be to plug it in a separate bill. Using this 'one time' money for over due transportation programs is bound to generation at least 10 times the cost in economic activity.

Re:Double Irish? TAX ALL FOREIGNERS!!!

[Strangely Familiar]

Do you even know what foreign earnings are? Do you get that U.S. companies are setting up foreign shell corporations to hold all their patents, so that they can make royalty payments to those foreign companies, thereby avoiding profits that were, in reality, made on inventions conceived and developed here in the U.S.? Patents are just one part of the puzzle, but they illustrate a great point.

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Inventors, both native and foreign born, live in the U.S., after being educated in U.S. universities, using U.S. infrastructure and support networks. They land jobs with U.S. companies to invent, develop and sell products to U.S. citizens. The U.S. patent rights on those products are sold to a foreign company which then charges the U.S. corporation a high royalty. The patents are only valuable because of the extensive U.S. patent system which protects the intellectual property of inventors and their corporate assignees, foreign or domestic. The foreign shell company makes all of the profits in a small country with tiny or non-existent taxes. The U.S. company claims all the royalty payments as expenses, wiping out U.S. profits. Here is one example of many. http://www.usatoday.com/story/... Then, tax attorneys educated by U.S. law schools prepare U.S. corporate tax returns that legalize all of this under laws written by corporate lobbyists for the benefit of U.S. corporations. Then the U.S. corporations control their media subsidiaries (ABC, NBC, FOX, CBS), to try to justify all of this. It isn't a perfect plutocracy, so they must pay P.R. firms, pundits, and think tanks to convince people like you that Barack Obama is a socialist trying to steal their money, and that his 14% tax proposal to pay for U.S. highways is wildly unfair double taxation.

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But by all means. Go ahead and keep watching Fox "News". It is your right. Rupert Murdock's interests are undoubtedly aligned with the long term interests of U.S. citizens. I'm sure the republic will limp along just fine if all its citizenry are too busy to discover anything resembling the truth. And don't worry your little head. Obama's proposal has zero chance of being passed by either the corporate-controlled House or Senate. Even if I changed your mind (which I am certain I have not), there are millions upon millions out there who will listen to corporate sponsored political commercials and vote to keep either the corporate-backed republicans or corporate-backed democrats in power. I can't convince them all. They won't see this post, or visit my website. It is simply TLDR. You have won the argument. Congratulations.

Re: Perfect way to drive "US companies" out of the

[__aaclcg7560]

Never mind that taxes at an 80 year low. When taxes were 90% after WW2, many corporations plowed that money back into the business to avoid giving it to Uncle Sam. With low inflation and low interest rates, many corporations are content to hoard cash and let it sit idle.