Obama targets foreign profits with tax proposal, Republicans skeptical

“President Barack Obama’s fiscal 2016 budget will seek new taxes on trillions of dollars in profits accumulated overseas by U.S. companies, and a new approach to taxing foreign profits in the future, but Republicans were skeptical of the plan on Sunday,” Jeff Mason and Kevin Drawbaugh report for Reuters. “Reviving a long-running debate about corporate tax avoidance, Obama will target a loophole that lets companies pay no tax on earnings held abroad, the White House said. “But his proposal was certain to encounter stiff resistance from Republicans.”

“In his budget plan to be unveiled on Monday, Obama will call for a one-time, 14 percent tax on an estimated $2.1 trillion in profits piled up abroad over the years by multinationals such as General Electric, Microsoft, Pfizer Inc. and Apple Inc,” Mason and Drawbaugh report. “He will also seek to impose a 19 percent tax on U.S. companies’ future foreign earnings, the White House said.”

“The annual budget proposal is as much a political document as a fiscal roadmap, requiring approval from Congress. Given Washington’s current political division, much of what will be laid out on Monday is unlikely to become law,” Mason and Drawbaugh report. “On proposed tax increases for the wealthy and large companies that are part of that package, Paul Ryan, the top Republican tax writer in the House of Representatives, said on NBC’s Meet the Press: ‘What I think the president is trying to do here is to, again, exploit envy economics.'”

“Ryan aide Brendan Buck said in an emailed reply to questions that tax reform should be about simplifying the code and lowering rates,” Mason and Drawbaugh report. “‘If that’s the approach the administration is willing to take, there may be room to find common ground,’ he said. ‘There won’t be, however, if the president instead tries to sock American businesses with big tax hikes just to increase spending and add even more complexity to the code.'”

Read more in the full article here.

“A proposal last year from Dave Camp, then the Republican chairman of the House Ways and Means Committee, would have taxed the one-time profits at 8.75 percent for cash and 3.5 percent for other assets. Camp didn’t use a pure minimum-tax system for future profits, and still, his plan didn’t get universal acclaim from U.S. multinational corporations,” Richard Rubin and Jonathan Allen report for Bloomberg. “Under current law, U.S. companies owe the full 35 percent U.S. tax on income they earn around the world. They get tax credits for payments to foreign governments and don’t have to pay the U.S. tax until they bring the money home.
That system gives companies an incentive to push profits outside the U.S. and leave them there. Apple Inc. and Google Inc. are among the many U.S. companies doing that, and companies’ disclosures indicate how little foreign tax they pay.”

Read more in the full article here.

MacDailyNews Take:

Under the current U.S. corporate tax system, it would be very expensive to repatriate that cash. Unfortunately, the tax code has not kept up with the digital age. The tax system handicaps American corporations in relation to our foreign competitors who don’t have such constraints on the free flow of capital… Apple has always believed in the simple, not the complex. You can see it in our products and the way we conduct ourselves. It is in this spirit that we recommend a dramatic simplification of the corporate tax code. This reform should be revenue neutral, eliminate all corporate tax expenditures, lower corporate income tax rates and implement a reasonable tax on foreign earnings that allows the free flow of capital back to the U.S. We make this recommendation with our eyes wide open, realizing this would likely increase Apple’s U.S. taxes. But we strongly believe such comprehensive reform would be fair to all taxpayers, would keep America globally competitive and would promote U.S. economic growth.Apple CEO Tim Cook, May 21, 2013

[Thanks to MacDailyNews readers too numerous to mention individually for the heads up.]

Related articles:
Senator Rand Paul finds Democratic partner for tax repatriation holiday – January 30, 2015
Businesses hopeful Republican control of U.S. Congress will break tax-reform gridlock – November 5, 2014
Not in Taxes anymore: On site at Apple’s famous Irish ‘headquarters’ – November 2, 2013
Regan: U.S. tax code spurs loveless foreign corporate ‘marriages’ – May 13, 2014
Ireland to close Apple’s tax loophole, but leave bigger one open – October 15, 2013
G20 think tank OECD proposes blueprint for global crackdown on tax avoidance – July 19, 2013
Thomas Sowell on Apple, corporate taxes, and ‘the road to serfdom’ – May 28, 2013
Taxing Apple just taxes you – May 24, 2013
Don’t tax Apple, tax its shareholders – May 24, 2013
If Apple paid more tax, we might pay less or something – May 22, 2013
Apple CEO Tim Cook pounds another nail into the Keynesian coffin – May 22, 2013
Apple CEO Cook makes no apology for company’s tax strategy – May 22, 2013

70 Comments

  1. today, it’s conservative and liberal. tomorrow, it’s eloi and morlock. those near-autocrats in federal government should be careful not to provoke the people from whose formidable toils they seek to take so, so much. there are a few chaise lounge political operatives that immediately come to mind who should be in a pillory and set on the lawn at 1600 pennsylvania avenue.

    there’s a reason why these words were written. ‘a well regulated militia being necessary to the security of a free state, the right of the people to keep and bear arms shall not be infringed.’

  2. Just curious…

    a lot of people are bashing corporations like Apple and basically say Tax The Shit out of them.

    So what are you going to do with your retirement?
    If you unlucky enough to not have a govt pension and instead depend on 401s etc or mutual funds chances are (if you or your fund is smart) it will have AAPL.
    So if AAPL goes down in value together with all the other companies with the shit taxed out of them so will your retirement funds . As seen in 2007 the stock market can go down 50% (and so can your 401s). The Billionaires will just go move their cash into buying real estate etc (or become Govt SUPPLIERS like Haliburton to get all that nice Tax money).. can you?

    Maybe the whole plan is that Govt. does everything and we all go on welfare?

    And if companies like Apple take the money back to the USA, even if it didn’t invest in providing jobs like it’s Mac Pro factory or it’s investment in chip factories in Texas (together with partners) or Glass factories like it’s attempt with the Sapphire guys, then at least the money via dividends might end up with Investors, you know Americans who will spend their money and support local business INSTEAD of it being frozen overseas. Even if it’s in a USA BANK at lest the bank can loan it out to Americans to do business …

    Some people here think that channelling Chinese, Korean money into USA investors pockets is an evil thing… (?????)
    —-

    It’s not that Govt. doesn’t have money , it collects hundreds of billions, it both Conservative and Liberal and All in Between WASTE huge amounts.
    An extreme example is Russia where a 50 billion olympics ended up with 40 b entering the pockets of Putin’s cronies (like thousands $ for a chair etc) Perhaps in less extent this happens everywhere. I use to work as a govt. subcontractor and I assure you it does.

    1. I already know what everyone is doing for retirement: paying into a system that prevents the weakest links of society from living in disease and poverty. Some of us believe that is our duty and honor. Some people would rather let the weak die off. All I know is that there are a lot of baby boomers with very thick pocket books, and a lot of young college graduates who can’t find a decent job. Something has to change. American needs to start building things again. It might as well be bridges and renewable energy products and stuff.

      1. ” as well be bridges and renewable energy products”

        Great that you mentioned ‘bridges’ as I got a real story…

        I live in a small town.
        they are building a new bridge as the mayor let the old one fall apart.
        When he got elected, 90% of his election contributions came from a handful of large contractors. (He had 7 times the money than the candidate I voted for)
        The bridge reconstruction, he said it would cost 40m, after taking the old one down the cost overrun is now 110 million with no end in sight. (all they have are foundations and some happy contractors ). the mayor also sold a piece of water view public land for $1 saying the city which he bankrupted needed ‘outside investments for development’ , the contractors are now building a billion dollar condo and housing project on that land….

        The city council raised property taxes near 40% in the last few years to pay for this and other ‘improvements’.
        The mayor and his city council also some time back had a plan to buy and ‘distribute FREE BONG PIPES’, according to them it would reduce commutable diseases….
        (I live in la la land in the northwest).

        I would rather make decisions to spend my own money.

        —-
        I am a Social Liberal (gays, minorities, eccentrics don’t bother me), but I am a Fiscal Conservative.
        If liberals or conservatives want to waste and steal my money : Fu@k ’em.

        1. I forgot to add in my local town story:
          by raising property taxes and also levies on power, transport and water (500 to $1000 a year levy per house on water here in the Northwest the wettest part of North America!) local businesses are closing and moving away (think a small version of Detroit). A recent local headline local story was ‘shuttered storefronts’. Not only can’t many businesses thrive, they can’t find workers either as working people can’t afford to live here.

          If they Tax Corporations too much they will move. Burger King for example is moving it’s HQ to Canada for a slightly lower tax rate.

          So your tax is great post to create jobs as in my local case (as in most cases) Don’t Work.

  3. God only asked 10%. Why should government get more?

    Right now we all pay out nearly 50% of our earnings in taxes at all levels of government. More than 50% work in government related jobs. One in five men are incarcerated in the USSA and if they do work, get about $1 per day for their labor.

    In reality, we all work for the government. Our lives were forfeit the day we obtained a birth “certificate”.

    Government, grant a Jubilee and let all of us become debt free this year. Forget power and allow liberty and freedom again so we may prosper and become productive.

  4. China has become an economic powerhouse today because they are LESS communist and MORE capitalist.

    But all the ‘hate Corporate Apple’ posters here think the solution to USA economy is
    LESS capitalism and MORE communism.

    1. Whatever. doesnt China have like 1.4 billion people and the USA 365 million. that’s the story

      so to listen to the nutcase talking heads, to be more competitive they want to lock borders so no one else can imigrate. Why? Because your’e scared of brown skinned people? The crime rate is lower now than it was in the oh so perfect Reagan era.

      I think you and your buddy bovtinik like calling everyone communists when people here mostly seem to be saying that corruption is killing our democracy. And who is corrupting your government, the working stiff on Main Street or the CEO dialing it in from Manhattan, or the Caymans or whatever???????????

      1. your post has practically nothing to do with what i’m saying.

        I’m just pointing out that when China had rigid communism like under Mao people over there were poor as was the country, millions died of starvation in-spite of Communism’s welfare state called “Iron Rice Bowl” . When the country started to open up to capitalism the standard of living as well as the GDP improved dramatically as well personal freedom and workers rights. Foxconn the big Apple supplier is a capitalist company, a subsidiary of Hon Hai of Taiwan.

        Many countries do NOT tax repatriated income from overseas as they want the companies to funnel cash earned overseas (like china and Korean Apple sales) to their home countries. Korea taxes Samsung less than 5% for LOCAL sales while Apple pays 20-30% Tax on all sales in USA.

        More taxes on corporations are going to give USA rivals a bigger advantage besides my arguments (in my earlier posts) that it is taking money out of aapl investors (like from the 401s, , savings mutual funds etc. Most aapl is held by funds), punishing people who decide to save for their own retirement instead of feeding off social security or welfare.

  5. What a bizarre thread. Seems like most people here believe in democracy that represents the people, and they believe that with an engaged population that their government could work for them. But some rather rude commenters seem to think that lowering tax rates is a magical solution to government inefficiencies, and then they overstep and accuse anyone not lambasting all government officials they don’t like as being communist.

    What exactly does lowering taxes solve other than giving you more beer money each month? I mean, obviously there is way too much corruption that needs to be cleaned up, but if you don’t fix the spending problem, the lobbyist problem, and the campaign finance problem then all you have is a corrupt government with a bigger deficit.

    Screw both parties. We need a new fiscally responsible Bull Moose Party.

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