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Obama international proposals leave think tanks cold

May 06, 2009

President Obama is going after multinationals. Tax Vox, the blog of the center-left Tax Policy Center, says the President is misguided:

Second, Obama is conflating two issues: tax abuse and legitimate efforts by multinationals to reduce their tax liability. To the degree he is trying to crack down on real abuse, bravo. Washington has been yapping about this for years, but never pulled it off. Maybe Obama will. It is about time.
But a company’s decision to defer paying U.S. tax on foreign income by leaving profits overseas is not abuse. It is a perfectly sensible response to a U.S. system of taxing multinationals that is out of synch with most of the world.

The center-right Tax Foundation is less charitable:

"The proposal, however, is flawed and fails to recognize that in the increasingly global economy where capital flows freely across borders, the United States can no longer expect other countries to follow its policies. The proposal will penalize the foreign operations of U.S. companies operating abroad and make it more difficult for them to compete with foreign companies.
"The manufacturing of tractors or generating facilities in places like China and India will be less likely to be done by U.S. companies. Rather, these business opportunities will more likely be won by the foreign competitors of U.S. companies with the economic rewards—jobs and profits—going abroad rather than U.S. companies.

"The real problem that the U.S. faces is that the U.S. tax system is increasingly out-of-line internationally. The U.S. now has the second highest corporate tax rate, exceeded only by Japan. Other measures of corporate tax rates show the same downward trend in corporate tax rates abroad.

It seems that these proposals will struggle, in spite of Democratic control of both houses of Congress.

Tags: Obama Tax Policy.tax policy.