Step one: stop the bleeding. Step two: middle class tax cuts. Step three: end the tax cuts for our wealthiest citizens. Step four: put some money into the hands of people who need it, and will spend it.
Whats next, you ask? Make sure everyone pays their share. Next up is addressing tax advantages for American companies who shelter profits in foreign countries, and individuals who shelter funds in off shore accounts, which are virtually impossible to track, or at least most thought.
So the Obama administration goes to Switzerland, and they agree to cooperate on a specific investigation, not a generic list of Swiss accounts held for Americans. Next step: vowing to "detect and pursue" U.S tax evaders and go after their offshore tax shelters. What is at stake? Just potentially $210 billion over the next 10 years. Very, very smart.
In announcing a series of steps aimed at overhauling the U.S. tax code, Obama complained that existing law makes it possible to "pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, New York. "
The president said he wants to prevent U.S. companies from deferring tax payments by keeping profits in foreign countries rather than recording them at home and called for more transparency in bank accounts that Americans hold in notorious tax havens like the Cayman Islands.
"If financial institutions won't cooperate with us, we will assume that they are sheltering money in tax havens and act accordingly," Obama said. Under the plan, companies would not be able to write off domestic expenses for generating profits abroad. The goal is to reduce the incentive for U.S. companies to base all or part of their operations in other countries, as well as hiring nearly 800 new IRS agents to enforce the U.S. tax code.
The president said he wants to prevent U.S. companies from deferring tax payments by keeping profits in foreign countries rather than recording them at home and called for more transparency in bank accounts that Americans hold in notorious tax havens like the Cayman Islands.
"If financial institutions won't cooperate with us, we will assume that they are sheltering money in tax havens and act accordingly," Obama said. Under the plan, companies would not be able to write off domestic expenses for generating profits abroad. The goal is to reduce the incentive for U.S. companies to base all or part of their operations in other countries, as well as hiring nearly 800 new IRS agents to enforce the U.S. tax code.
The current tax code, he said, makes it too easy for "a small number of individuals and companies to abuse overseas tax havens to avoid paying any taxes at all." Under existing laws, companies with operations overseas pay U.S. taxes only if they bring the profits back to the United States. If they keep the profits offshore, they can defer paying taxes indefinitely. Obama's plan, which would take effect in 2011, would change that.
Obama officials also said they would close a Clinton-era provision that would cost $87 billion over the next decade by letting U.S. companies "check the box" and treat international subsidiaries as mere branch offices. Officials said it was meant as a paperwork shortcut that is now a widely used and perfectly legal way to avoid paying billions in taxes on international operations. The White House said that in 2004, multinational corporations enjoyed an effective tax rate of 2.3 percent in the United States because of such allowances.
Obama officials also said they would close a Clinton-era provision that would cost $87 billion over the next decade by letting U.S. companies "check the box" and treat international subsidiaries as mere branch offices. Officials said it was meant as a paperwork shortcut that is now a widely used and perfectly legal way to avoid paying billions in taxes on international operations. The White House said that in 2004, multinational corporations enjoyed an effective tax rate of 2.3 percent in the United States because of such allowances.
Critics (and many in Congress will lobby for their large corporate financial campaign supporters) will say it will do nothing more than cost job creations at home. No doubt this is a big initiative that will largely gauge Obama's ability to push his political agenda through the Democratically controlled Congress.
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