This editorial appeared in The (Tacoma) News Tribune.
President Obama, in taking aim at tax benefits enjoyed by U.S. companies operating overseas, is hoping public sentiment against outsourcing will help him balance his budget.
The president has long said he would pursue overseas tax evaders. Now with the federal government struggling to deal with the recession, Obama needs to recoup that money more than ever.
But his plan, announced Monday, is more than a crackdown on tax cheats. It also represents a large tax increase on U.S. businesses that employ millions and are struggling themselves to weather the economic downturn.
Where Obama gets it right is in his proposal to undo changes made during President Clinton's administration that allow multinational corporations to avoid paying U.S. taxes by sending profits to subsidiaries in low-tax countries.
The Government Accountability Office reported this year that 83 of the 100 biggest companies had subsidiaries in tax havens. The arrangement often amounts to a double dip. Not only do companies avoid paying U.S. taxes, but they also are able to deduct the interest payments made on loans from those subsidiaries.
Correcting that mistake – which Clinton unsuccessfully tried to do during his presidency – is the biggest piece of Obama's plan to recoup $210 billion over the next 10 years by closing loopholes and changing the tax code.
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