Looks like the Obama administration is hard at work trying to prolong the recession:
http://townhall.com/news/politics-elections/2009/05/04/obama_announces_plan_to_close_tax_loopholesPresident Barack Obama plans changes to tax policy certain to be unpopular with corporations with international divisions and individuals who use tax havens.
Obama's two-part plan, which he will announce later Monday at the White House, also embraces 800 additional federal agents to enforce the tax code.
The president's proposal would eliminate some tax deductions for companies that earn profits in countries with low tax rates, as well as consider U.S. citizens who use tax havens in the Bahamas or Cayman Islands guilty of violating U.S. tax laws. If Obama wins congressional approval for the changes _ and he faces a challenge on Capitol Hill _ the new enforcement initiative could yield $210 billion in tax revenue over the next decade.
Treasury Secretary Timothy Geithner was to join Obama for the comments. The White House released details of the plan earlier Monday.
White House officials acknowledged the political challenges facing the plan. The administration won't seek a complete repeal of overseas tax benefits and, although the rule changes are narrower than some anticipated, business leaders still oppose them as a tax hike. Obama aides countered that the plan is a step toward the massive overhaul of international financial regulations that the president has promised.
In exchange, Obama said he was willing to make permanent a research tax credit that was to expire at the end of the year and is popular with businesses. Officials estimate that making the tax credits permanent would cost taxpayers $74.5 billion over the next decade.
But administration aides said that 75 percent of those tax credits pay workers' wages; given the struggling economy, aides were reluctant to do anything that could add more Americans to the unemployment rolls.
It was small comfort. Companies which shelter profits in international accounts stand to lose billions if Obama's plan becomes law. Under the existing regulation, those companies pay taxes only if they bring the profits back to the U.S. If they keep the profits offshore, they can defer paying taxes indefinitely _ and many do.
Obama's plan wouldn't go into effect until 2011; Obama has said he does not want to tinker with tax revenues until his $787 billion stimulus plan has run its course. The proposals, however, were far from complete, and aides said this was just one piece of the administration's plan for a sweeping overhaul.
First up: Companies won't be able to write-off domestic expenses for generating profits abroad. For instance, administrative tasks performed in New York for a London office would not be tax deductible in the United States.
Administration officials depicted the move as a way to close unfair tax loopholes that encouraged companies to send jobs overseas. They argued that if it costs the same amount to do business in, say, Ireland as in Iowa, why not do it entirely in Des Moines? Officials said Obama would characterize the move as a way to keep jobs in the United States and fight a system that is rigged against U.S. companies who keep their entire business operation domestic.
Obama also planned to ask Congress to crack down on tax havens and implement a major shift in the way courts view guilt. Under Obama's proposal, Americans would have to prove they were not breaking U.S. tax laws when they send money to banks that don't cooperate with tax officials. It essentially would reverse a long-held assumption of innocence in U.S. courts.
If financial institutions cooperate with Washington and disclose details when asked, Americans could invest anywhere they like.
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.
I put the reason for all this in red. I put the dangerous changes in blue.
Of course the Obama administration is touting this as "paying their fair share." To me it illustrates the folly of creating tax "loopholes." They are put in because some politicians realize how much higher taxes will kill business. However, rather than fighting for lower tax rates, they try to hide the breaks in "loopholes". Afterwards, their opponents will come back and remove the loopholes claiming that companies "aren't paying their fair share."
This is how Obama thinks he will pay for his plans. It's not "raising taxes"; it's just eliminating some tax breaks. (I'm sure he has more of the same planned on the way).
I love their idea of removing the tax breaks for work done for foreign offices in the US. And then they think it will increase employment here. No, instead all the work will be done in that lower tax country. But apparently the people in the administrations aren't smart enough to realize that.
Next they are putting the burden of proof on individuals to PROVE THEY AREN'T BREAKING THE LAW. No more assumption of innocence.
All this will do is make it more costly to operate within the United States. Does the administration not realize we are no longer the only place with good regulations and low taxes?
Keep killing the goose with the golden eggs, Washington.
