Proposal to eliminate some taxes on overseas profits

[Liberty]

http://online.wsj.com/article/SB10001424053111904103404576561020226498738.html

 

WASHINGTON—The Treasury Department is considering a proposal to eliminate some but not all taxes on the overseas profits of U.S. multinational companies, a central element of the administration's broader plans to overhaul the corporate-tax code, according to two people familiar with the deliberations.

 

U.S. businesses have pushed hard to exempt all overseas earnings from U.S. taxes, claiming the current system puts them at a disadvantage to foreign competitors.

 

The taxation of overseas income is a political hot potato. Liberals and trade unions have warned that eliminating U.S. taxes on overseas earnings could encourage businesses to shift operations and jobs overseas. Conservatives and businesses, meanwhile, could be disappointed that the proposal from the Obama administration, which is still in the discussion stage, doesn't go far enough.

 

The U.S. is rare among major industrial powers in maintaining a global taxation system, which often subjects the overseas earnings of companies to U.S. levies after they've been taxed by their overseas hosts. Most large countries primarily tax domestic earnings, in what is known as a territorial taxation system.

 

The Treasury plan under consideration would create what officials refer to as a "tough" territorial system, which would shield some overseas profits from U.S. taxes. A key issue is what kind of profits would be excluded. The details of the plan couldn't be learned.

 

The provision is part of a broader Treasury rewrite of the corporate-tax code that has been in the works for months. The rewrite could have a major impact on U.S. corporations. It is expected to include a significant cut from the current 35% corporate-tax rate and changes to various deductions that are a staple of American corporate finance.

 

The White House had hoped to release its overall proposal in May or June, but shelved it after the debt-ceiling debate consumed Washington. Treasury officials intend to go public with the plan sometime in the fall. Any changes would require congressional approval. The chances of enactment as the 2012 election season heats up are slim.

[beerbaron]

Told you Obama did not have a lot of Aces left and would use them all before elections!

 

BeerBaron

[Packer16]

I am not sure how good of an ace this is.  It may be good on paper but not so good in practice (generates little or no re-patriation).  Why would you bring money home with this crew when in a 18 months you may have a more "business freindly" crew there.  I see his only ace as 0% taxation re-patriation given the current view of this crew by business.  I agree with Myth, a liberal trying to implement conservative policies is a loose/loose.  You need a conservative or a fiscal conservative like Clinton to get the business community on board.

 

Packer

[QLEAP]

http://www.winamericacampaign.org/

 

I think its just a matter of time ...

[beerbaron]

I am not sure how good of an ace this is.  It may be good on paper but not so good in practice (generates little or no re-patriation).  Why would you bring money home with this crew when in a 18 months you may have a more "business freindly" crew there.  I see his only ace as 0% taxation re-patriation given the current view of this crew by business.  I agree with Myth, a liberal trying to implement conservative policies is a loose/loose.  You need a conservative or a fiscal conservative like Clinton to get the business community on board.

 

Packer

 

This is a policy that will appear in page 25 of newspapers. Obama needs employments, that's the only number that matters for the next election. Trillion deficits, trillions of money printing, nobody cares except the 1% that has money. When your unemployed all you ask is to fix it, not how you fix it...

 

BeerBaron

 

 

[Packer16]

We will see but I would not be surprised that the admin does someting to prevent this from occuring.  You have to remember you are dealing with a college professor who thinks he is right and everbody else is wrong and has not developed a working relationship with the opposition.  I hope they do get it right for everybody involved.

 

Packer

[rjstc]

We will see but I would not be surprised that the admin does someting to prevent this from occuring.  You have to remember you are dealing with a college professor who thinks he is right and everbody else is wrong and has not developed a working relationship with the opposition.  I hope they do get it right for everybody involved.

 

Packer

Packer, you make him sound like like he's the leader of the Republican Tea Party Group. Who think they are always right, everyone else is wrong, and unless you do exactly what they want will throw a "Canter" tantrum.

[Packer16]

I think you have hit the nail on the head.  As both sides have not developed a trusting or even respectful relationship with each other.  In the past, the President has developed those relationships (think Reagan, Clinton and Bush) to carry out/push forward his agenda but these folks have tried a different path (try to develop relationships with combative language - which may play well with base but pushes away opposition leaders) with the results we have today.  We need a President that can develop effective relationships with a large enough portion of the opposition to move us forward. 

 

Packer

[bargainman]

Packer, but who's fault is that?  It seems to me that Obama is always making gestures to the other side.  But those are regularly rejected.  During the debt ceiling debacle it sounded like he was willing to cut into medicare and medicaid, and anger a lot of his party, but the one thing he asked in return was an increase in taxes for the wealthy, but there was no willingness to budge from the other side, not an inch.  Do you not see it that way?  I'm not defending Obama per se, but in order for a respectful relationship to emerge, both sides must be open to that.  I personally perceive that Obama is, but the other side is not.  But I'd be interested in hearing another opinion.  The other thing that makes me think this is the fact that the use of the fillibuster was unprecedented.  I read somewhere that the republican party used the fillibuster more times in the first 2 years than it had been used in a decade or more.

 

Thanks.

[Liberty]

My impression is also that Obama almost always tries to include something typically republican in his offers, while I don't remember the last time I heard a republican make a proposal and claim that it contains "positions usually favored by democrats, and that risk angering some in my own party", etc.

 

Hard to have a working relationship when the other side isn't even trying.

[Estimated Profit]

Interesting that if companies chose to repatriate money at this time that would reduce liquidity in Europe further.

 

Icing on the cake so to speak.

[Myth465]

Obama was dealt a crap hand, and is also dealing with a crap teammate. By consistently caving though he has pissed off his base and gotten nothing in return. I would have preferred if he stood his ground and took the message to the people saying this is what I am for, give me people I can work with to get it done. Instead he caves and no one is happy with the situation.

 

No one is happy with healthcare, the stimulus, or most of anything else he has done. Looking at polls and seeking common ground where there is no common ground is a hopeless strategy. The country politically is torn between right and left leaning ideas. They want the taxation of the right, and the benefits of the left.

 

Mixing and matching is what is bankrupting this country. Left works quite well (see Sweden), right may work well though I cant think of a place with right leaning ideals, and middle of the road looks something like Austrialia. Having the benefits without paying for them or the worst of both worlds wont work. Its why I prefer a liberal or a conservative, vs a guy who is whatever you want him to be.

 

Stacking a position and leveling with the people is a better strat inmo. Being pragmatic is great, but one should have some core principals inmo.

[Uccmal]

The ones who are starting to look real bad through all this are the Republicans, and the Tea Party in particular.  Moderate Republicans need to stand up to these buffoons and take back their party.  The polls are bad for Obama, but they are real bad for the Tea Partiers, who appear to have no substance, which is probably true.  The US electorate appears to be just as stupid as the Canadian electorate.  Witness British Columbia, where a tea party movement of sorts took hold, and is now going to cost the province Billions. 

 

RE: the repatriation of profits.  Like it or not the companies you are talking about are multinationals now.  Many of them do business abroad and are not going to bring home their overseas money, regardless.  Their head offices are located in the US but the majority of operations are elsewhere.  Politically speaking they are under constant pressure to invest in other countries by the respective countries.  The other aspect of this is foreign ownership of these companies which are all cross listed in London or Europe.  So, you repatriate the cash, pay a dividend, and a chunk of the cash flows right back out of the US. 

 

 

[Packer16]

I am not concerned with whose fault it is (it really deosn't matter).  He has shown he cannot work with the opposition.  I think his approach is not correct.  When you negotiate with someone you sit down with them (after having developed a relationship with them - which is missing here (look at what Regean did, he called every Democrat in Congress and developed a rapour with them - Obama on the other hand developed a relationship with one senator so he could get 60 votes in the Senate.  No outreach to anyone in the opposition until he was forced to with Boener and then only the minimal effort to appear to be working with him.  I would guess if he had a choice he would not work with them at all by his attitude.), they put thier demands down and you do the same and negotiate.  You keep the details quiet to help both sides keep face. You as leader try to enforce this.  You do not call the opposition your enemy as by your leadership you are condoning much worse action by your colleages.  Finally, you sincerely give every one credit and move on.  Can you see Obama doing this?  I cannot.  His approach of putting what he thinks they want in a proposal and call it his own is another thing you don't do.  You give credit to everybody and don't worry that you won't get credit because people won't remember who got credit or who should have they will remember whether something got done or not.

 

How would you feel if your negotating partner did the things the Obama has done to the Republicans (call them enemies and unreasonable every chance he gets because he doesn't have the skills/willingness to really negotiate and share credit) to you regardless of who is "right" or "wrong".  You can argue that Republicans are unfair to Obama but what President did not have to deal with that from the opposition?  Presidents need to rise above the unfair issue and take one for the country and he/she will be rewarded.  Obama is not willing to take one for the country and is mired in the fairness argument.

 

I think the result has as much to do with the style Obama pursues as his substance.  Why else would he not be able to get the opposition to agree to someting 80 to 90% of the public agrees to (increasing taxes on the rich).  If he spent half as much time on being concerned on how the his opposition can save face versus world dicatators, we would be fine.  I think a major defect is his style which I do not see changing so anyone else with a halfway decent style should be able to defeat him.  Just another take.

 

 

Packer

 

 

[Packer16]

I think looking at polls to find out who the public blames is like backward looking stock selection, it tells you where you have been not where you are going.  Also asking Congressional approval overall is the wrong question (as it is easy to blame others in a crowd).  The correct question is do you approve your own Congressperson's performance and a better one to compare to a Presidental approval.  What folks are looking for is someone to act like an adult (take some hits for the team) and not be concerned about credit.  Today I think Romney appears to be the winner in that category.  A contrary view.

 

Packer

[Myth465]

Packer those are some good points and something I hadnt considered, thanks for sharing.

[rjstc]

What might happen to Tea Party Republicans is what happened to Pelosi Democrats. Pelosi is to the Dem left what they are to the Republican right. Neither want compromise. One difference is in California Pelosi, Boxer, etc are unfortunately unbeatable.

[alwaysinvert]

Mixing and matching is what is bankrupting this country. Left works quite well (see Sweden), right may work well though I cant think of a place with right leaning ideals, and middle of the road looks something like Austrialia. Having the benefits without paying for them or the worst of both worlds wont work. Its why I prefer a liberal or a conservative, vs a guy who is whatever you want him to be.

In a relative sense, I'd guess that the prime example of that would be your country, the most successful country in the history of the world. At least historically.

 

As for the perceived over-stubborness of the republicans in congress, that story seems extremely biased to me. Shouldn't their parliamentary strength translate to a much better negotiatory position? The opinion that sacrifices should be made in an equal amount from both sides doesn't seem prudent if adhering to the democratic process is an end in itself. As a foreigner with libertarian leanings (no emotional stake in either party), that argument reeks of smugness to me.

[rjstc]

Inflexibility leads to paralysis.

[Myth465]

Mixing and matching is what is bankrupting this country. Left works quite well (see Sweden), right may work well though I cant think of a place with right leaning ideals, and middle of the road looks something like Austrialia. Having the benefits without paying for them or the worst of both worlds wont work. Its why I prefer a liberal or a conservative, vs a guy who is whatever you want him to be.

 

In a relative sense, I'd guess that the prime example of that would be your country, the most successful country in the history of the world. At least historically.

 

As for the perceived over-stubborness of the republicans in congress, that story seems extremely biased to me. Shouldn't their parliamentary strength translate to a much better negotiatory position? The opinion that sacrifices should be made in an equal amount from both sides doesn't seem prudent if adhering to the democratic process is an end in itself. As a foreigner with libertarian leanings (no emotional stake in either party), that argument reeks of smugness to me.

 

For many in the Tea / Republican party the new deal which has been intake for greater than 50 years is too liberal. They seek to dismantle it. I cant think of any modern nation without at least the new deal. Most are farther to the right.

 

I cant think of a country that is based on Libertarian principles. The US has some basic bits of the well fare state which are essentially unpaid for. The right simple wants to dismantle these bits. As I said I cant think of any modern countries without these bits, that I would want to live in. Perhaps you can. We have been quite successful with low taxes and middle of the road benefits, but we can no longer grow our way out of the benefits and nor can we continue to put them on the charge card. We either have to pay via taxation for them or remove them inmo. Americans have to collectively make a choice inmo.

 

The dems should have changed the rules when they had the chance especially regarding the fillibuster. I think the right has a right to abstain from governing. The left should frame it properly and take the case to the people. They have failed at that. I think the differences are too large, and things will be decided in the next election or they wont and this will continue. Personally I think thats a good thing, a definitive choice needs to be made.

[alwaysinvert]

Mixing and matching is what is bankrupting this country. Left works quite well (see Sweden), right may work well though I cant think of a place with right leaning ideals, and middle of the road looks something like Austrialia. Having the benefits without paying for them or the worst of both worlds wont work. Its why I prefer a liberal or a conservative, vs a guy who is whatever you want him to be.

 

In a relative sense, I'd guess that the prime example of that would be your country, the most successful country in the history of the world. At least historically.

 

As for the perceived over-stubborness of the republicans in congress, that story seems extremely biased to me. Shouldn't their parliamentary strength translate to a much better negotiatory position? The opinion that sacrifices should be made in an equal amount from both sides doesn't seem prudent if adhering to the democratic process is an end in itself. As a foreigner with libertarian leanings (no emotional stake in either party), that argument reeks of smugness to me.

 

I cant think of a country that is based on Libertarian principles. The US has some basic bits of the well fare state which are essentially unpaid for. The right simple wants to dismantle these bits. As I said I cant think of any modern countries without these bits, that I would want to live in. Perhaps you can. We have been quite successful with low taxes and middle of the road benefits, but we can no longer grow our way out of the benefits and nor can we continue to put them on the charge card. We either have to pay via taxation for them or remove them inmo. Americans have to collectively make a choice inmo.

 

The dems should have changed the rules when they had the chance especially regarding the fillibuster. I think the right has a right to abstain from governing. The left should frame it properly and take the case to the people. They have failed at that. I think the differences are too large, and things will be decided in the next election or they wont and this will continue. Personally I think thats a good thing, a definitive choice needs to be made.

I wasn't talking about libertarian states, but if Sweden can serve as an example of a good leftist/semi-socialist country, I think it is fair to say that the US can be said to be a good example of a right-wing/conservative country. Even if there is lots of room to go further to the right and left respectively for both countries (though, as a Swede suffering almost 60% tax burden I have my issues with that, lol). In some ways Sweden is and have been more pro-market than most countries, though. Certainly more pro free-trade than the US, for example. And during the 19th century, when Sweden went from one of the poorest countries in the world with over 1m emigrants to the US (about a third of the population if my memory serves me right) to the upper-tier of industrial countries we were arguably one of the freest countries in the world. 

 

As for the rest, I agree with you in your analysis, although we probably differ much in where those facts take us stance-wise. Of course, the same goes for all Western European countries, of which most have poorer demographics than the US, coupled with more extensive social benefits and poorer productivity.

[beerbaron]

I wasn't talking about libertarian states, but if Sweden can serve as an example of a good leftist/semi-socialist country, I think it is fair to say that the US can be said to be a good example of a right-wing/conservative country. Even if there is lots of room to go further to the right and left respectively for both countries (though, as a Swede suffering almost 60% tax burden I have my issues with that, lol). In some ways Sweden is and have been more pro-market than most countries, though. Certainly more pro free-trade than the US, for example. And during the 19th century, when Sweden went from one of the poorest countries in the world with over 1m emigrants to the US (about a third of the population if my memory serves me right) to the upper-tier of industrial countries we were arguably one of the freest countries in the world. 

 

As for the rest, I agree with you in your analysis, although we probably differ much in where those facts take us stance-wise. Of course, the same goes for all Western European countries, of which most have poorer demographics than the US, coupled with more extensive social benefits and poorer productivity.

 

Yes but your boose is so expensive in Sweeden.. how can BeerBaron ever visit such a place..

 

BeerBaron

 

 

[alwaysinvert]

I wasn't talking about libertarian states, but if Sweden can serve as an example of a good leftist/semi-socialist country, I think it is fair to say that the US can be said to be a good example of a right-wing/conservative country. Even if there is lots of room to go further to the right and left respectively for both countries (though, as a Swede suffering almost 60% tax burden I have my issues with that, lol). In some ways Sweden is and have been more pro-market than most countries, though. Certainly more pro free-trade than the US, for example. And during the 19th century, when Sweden went from one of the poorest countries in the world with over 1m emigrants to the US (about a third of the population if my memory serves me right) to the upper-tier of industrial countries we were arguably one of the freest countries in the world. 

 

As for the rest, I agree with you in your analysis, although we probably differ much in where those facts take us stance-wise. Of course, the same goes for all Western European countries, of which most have poorer demographics than the US, coupled with more extensive social benefits and poorer productivity.

 

Yes but your boose is so expensive in Sweeden.. how can BeerBaron ever visit such a place..

 

BeerBaron

 

Clearly, it's in the interest of promoting public health that we have a state-owned monopolist running with 60% margins...

 

(Luckily enough Germany is nearby, thank god for customs unions)

[Myth465]

My god you guys do make having a good time via alcohol very hard to do. I now know why Scandinavians drink and smoke so much when they go on vacation.

[Myth465]

Here is an excellent article which I believe shows what the GOP stands for, also has a few thoughts on the overseas profits tax.

 

http://www.washingtonpost.com/the-magical-world-of-voodoo-economists/2011/09/07/gIQARBiEIK_story.html

 

The US is a decent example of a right wing government, but if this is successful it will be one big experiment which should be interesting. With that said, as a Liberal, I have no idea what the democrats are for. I give the GOP credit though for offering the American people a choice, though I think they are flawed because few people want to live in the world they want to create. At least I dont.....

 

-----

 

The magical world of voodoo ‘economists’

 

Repeal the 20th century. Vote GOP.

 

It’s not just the 21st century they want to turn the clock back on — health-care reform, global warming and the financial regulations passed in the wake of the recent financial crises and accounting scandals.

 

These folks are actually talking about repealing the Clean Air Act, the Clean Water Act and the Environmental Protection Agency, created in 1970s.

 

They’re talking about abolishing Medicare and Medicaid, which passed in the 1960s, and Social Security, created in the 1930s.

 

They reject as thoroughly discredited all of Keynesian economics, including the efficacy of fiscal stimulus, preferring the budget-balancing economic policies that turned the 1929 stock market crash into the Great Depression.

 

They also reject the efficacy of monetary stimulus to fight recession, and give the strong impression they wouldn’t mind abolishing the Federal Reserve and putting the country back on the gold standard.

 

They refuse to embrace Darwin’s theory of evolution, which has been widely accepted since the Scopes Trial of the 1920s.

 

One of them is even talking about repealing the 16th and 17th amendments to the Constitution, allowing for a federal income tax and the direct election of senators — landmarks of the Progressive Era.

 

What’s next — repeal of quantum physics?

 

------

 

My favorite, though, is a proposal, backed by nearly all the candidates along with the U.S. Chamber of Commerce, to allow big corporations to bring home, at a greatly reduced tax rate, the more than $1 trillion in profits they have stashed away in foreign subsidiaries.

 

“Repatriation,” as it is called, was tried during the “jobless recovery” of the Bush years, with the promise that it would create 500,000 jobs over two years as corporations reinvested the cash in their U.S. operations. According to the most definitive studies of what happened, however, most of the repatriated profits weren’t used to hire workers or invest in new plants and equipment. Instead, they were used to pay down debt or buy back stock.

 

But fear not. In a new paper prepared for the chamber, Republican economist Douglas Holtz-Eakin argues that just because the money went to creditors and investors doesn’t mean it didn’t create jobs. After all, creditors and shareholders are people, too — people who will turn around and spend most of it, in the process increasing the overall demand for goods and services. As a result, Holtz-Eakin argues, a dollar of repatriated profit would have roughly the same impact on the economy as a dollar under the Obama stimulus plan, or in the case of $1 trillion in repatriated profit, about 3 million new jobs.

 

It’s a lovely economic argument, and it might even be right. But for Republican presidential candidates, it presents a little problem. You can’t argue, at one moment, that putting $1 trillion of money in the hands of households and business failed to create even a single job, and at the next moment argue that putting an extra $1 trillion in repatriated profit into their hands will magically generate jobs for millions.

 

It took a while, but even Richard Nixon came around to declaring himself a Keynesian. Maybe there is still hope for Perry and the gang.