President Obama's New Proposal Explained!!!

[The_Hammer]

President Obama's new proposed corporate tax rate explained on the heels of milestones in US economic recovery as the Dow passed 13,000 points yesterday!

[Soul Crusher]

LOL!!!!   

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Obama Corporate Tax Reform a Sugar-Coated, Harmful Tax Hike
The Foundry/Heritage Foundation ^ | February 22, 2012 at 1:03 pm | J.D. Foster

Posted on Wednesday, February 22, 2012 3:49:32 PM by Hunton Peck

With his corporate tax reform “framework,” President Obama today added another element to his ultimately harmful economic agenda.

Previously announced anti-growth policies include massive budget deficits, a huge tax hike on individuals and small businesses in 2013, and his proposal to nearly triple the dividend tax rate.

His new proposal starts strong by reducing the federal corporate income tax rate to 28 percent from the current 35 percent. This is a good and long-overdue policy change. Regrettably, he marries rate reduction to a net corporate tax hike based in part on extending his policy to hammer and ultimately deconstruct U.S. multinational companies. The net effect is that his corporate tax reform would do more harm than good, representing yet another missed opportunity to help American workers.

The U.S. corporate tax rate is the world’s second highest—and soon to be highest in the world by far. The average of the OECD nations (nations considered to have developed economies) excluding the U.S. is just over 25 percent. The combined state and federal U.S. rate is nearly 40 percent. It is miraculous that U.S. companies can compete at all in the global economy with such a tremendous handicap.

At the same time, economists and policymakers increasingly understand that while the tax is paid almost exclusively out of profits that would otherwise go to the shareholders, the true economic burden falls primarily on workers. The reason is simply that the higher the effective corporate tax burden, the higher the hurdle rate on corporate investment. (The hurdle rate is the minimum rate a business must earn on investment to make the investment.) The higher the hurdle rate, the less investment takes place. The less investment takes place, the slower labor productivity grows, and the slower labor productivity grows, the slower wages grow.

This may seem a long chain of events, but every link in the chain is solid steel. In the end, it means the higher the corporate tax is, the lower workers’ wages are. This is why Democrats like President Obama and Senator Ron Wyden (D–OR) are now joining with Republicans anxious to see a lower corporate income tax rate. It’s certainly not to reward corporate executives or shareholders but to protect workers from further degradation of their wages.

Unfortunately, President Obama marries this extremely important policy to two very bad policies. He calls this corporate tax reform. But tax reform is revenue neutral. His policy is to expand the tax base—the measure of income subject to tax—by closing “loopholes and subsidies” so that the net effect is to increase corporate taxes substantially. That’s not tax reform. That’s just another tax hike in disguise. So Obama argues that we need corporate tax reform for economic growth and then proposes corporate tax hikes that would inhibit growth. Go figure.

There’s no doubt the corporate income tax code is laden with loopholes and subsidies, just as there is no doubt the President’s recently released budget adds to the list some of his own. His framework lists a handful of minor proposals carried over from his budget and then references three areas for reform without providing any details. Specifically, he references depreciation schedules, suggesting significantly higher taxes on business investment. He suggests paring back the deduction for interest expense, again raising the hurdle rate on business investment. And he suggests “establishing greater parity between large corporations and large non-corporate counterparts,” which is generally assumed to be code for levying a dividend tax on distributed profits of these non-corporate businesses.

Debating tax deductions is a Washington parlor game. However, suppose Obama chose wisely and that every such subsidy or loophole mentioned is a valid target for repeal. Rather than raising tax burdens, he should then cut the corporate tax rate further. Recall that the average of the OECD (excluding the U.S.) is just over 25 percent. At a 28 percent federal rate, the combined federal and state tax rate would then be nearly 33 percent, still well above that of the nation’s competitors. The U.S. federal rate needs to come down further, and Obama’s additional base broadening would permit it. But instead, Obama takes a pass on further rate reduction in favor of taking the cash for the federal government.

Raising corporate taxes is his first big mistake. Targeting U.S. multinationals specifically for higher taxes is his second. The issue is complicated, but it boils down to some simple points. U.S. multinationals compete on a global stage, earning income at home and abroad. Income earned abroad is taxed by the foreign government. The U.S. also taxes income earned abroad and employs some complex rules to prevent double taxation. In contrast, most of the rest of the world now recognizes the folly of adding domestic tax to the tax their companies pay overseas. This would just make their companies and their workers less competitive at home and abroad, as it does for U.S. companies today.

President Obama, however, wants to make an economically harmful policy worse by taxing U.S. companies’ foreign earnings even more heavily. The vision Obama outlines is to punish firms that outsource jobs and incentivize “insourcing.” The net effect, however, would be quite different. The net effect is to put a “for sale” sign on every profitable U.S. multinational company. The buyers, however, won’t be U.S. companies. The buyers will all be foreign companies.

The reason for this tax-induced fire sale is fairly simple: The reach of U.S. tax policy into income earned overseas extends only when it applies to U.S. companies. The U.S. has no taxing jurisdiction when it comes to the foreign earnings of foreign companies. For example, the U.S. taxes Toyota on what Toyota earns in the U.S. But the U.S. does not tax Toyota on what Toyota earns in Japan.

Suppose a U.S. company like HP earned all of its foreign income through a single foreign subsidiary called Globalsub. Now suppose Globalsub were taxed under Obama’s plan. Globalsub’s foreign profits would then be subject to foreign tax and an even more punitive U.S. tax.

If a foreign company like Sony were to buy HP, shifting Globalsub out of HP into its own foreign operations, then all of Globalsub’s profits would immediately be exempt from U.S. taxes. This sort of tax arbitrage would be very big business. It would also substantially reduce U.S. tax revenues.

Sound far-fetched? It isn’t. Remember when Mercedes-Benz bought Chrysler in 1998? Had Chrysler bought Mercedes instead, all of the German company’s profits would have been subject to U.S. tax, rendering the entire operation uncompetitive. This was all laid bare by John Loffredo, then the tax counsel for Chrysler, in testimony before the House Ways and Means Committee.

Another high-profile example occurred when the Belgian company InBev bought Anheuser-Busch in 2008 for $52 billion. The more U.S. tax policy in this area gets out of step with worldwide norms, the more U.S. companies become natural targets for foreign acquirers. President Obama’s tax policies would make matters much, much worse.

The right solution is to pursue a revenue-neutral corporate tax reform, reducing the corporate tax rate as far as sound base broadening will allow. At the same time, in international matters the U.S. should move in exactly the opposite direction from what President Obama proposes so that U.S. companies can compete globally and not become tax-induced targets for foreign acquirers.

[_bruce_]

Energy prices will rise - no matter what.
A creeping tool to rob the general public.

[Rami]

yes I would do her

[Soul Crusher]

Obama's Business "Tax Reform" Is a Tax Hike in Disguise
ATR ^ | 2012-02-22 | Ryan Ellis



The Obama Administration today released a business tax reform plan which is hardly worthy of the name. It raises taxes on employers by hundreds of billions of dollars over this decade, makes both larger and smaller companies less competitive than today, and would do nothing to make American companies more competitive around the world.

Raises taxes on employers with unemployment over 8 percent. The Administration plan is shameless in admitting that this is not actually business tax reform. Rather, it's a net tax increase on business with some shiny baubles that might remind one of real tax reform. How does it make any sense to raise taxes on job creators at a time when unemployment is at persistently-high levels?

Cuts the corporate rate, but not nearly enough. It's important to factor in state corporate income taxes when comparing corporate tax systems internationally. Using that metric, the U.S. corporate income tax rate under this plan drops from 39.2 percent to 32.3 percent. While that is a small amount of progress, it just isn't enough. The OECD average rate is 25 percent.

What about the rates of our biggest global trading partners? Our new 32.3% rate would only beat out France (34.4 percent) and Japan (38 percent as of later this year). We would not be competitive with the OECD average, nor with Canada (27.6 percent), the United Kingdom (26 percent), Mexico (30 percent), or Germany (30.2 percent). Rate reduction this inadequate makes the plan a lemon right from the start.

We've said before how "20 is the new 25." To have a truly globally-competitive corporate rate, you need to get the federal rate down to 20 percent or below. Doubles down on international double-taxation. The U.S. is one of the only countries left in the world which seeks to tax the worldwide income of her companies (on top of income taxes already paid overseas). The smart move would be toward a territorial system, where only U.S.-source income is taxed (as Obama's own jobs commission recommended). This could be transitioned into with a round of repatriation.

Rather than embracing this common-sense and globally-accepted idea, the Obama Administration wants to make the double taxation worse by imposing a global minimum tax rate. They also want to take away several of the tax provisions in law today which make this international double-taxation regime bearable for many companies. Discriminates against family-owned smaller businesses. The Administration plan broadens the tax base (read: eliminates exclusions, deductions, and credits) for everyone, but only cuts the tax rate for corporate employers. What about the 30 million sole proprietorships, partnerships, LLCs, and S-corporations that face taxation at the individual rates? Their tax rate goes up, from 35 percent today all the way to over 40 percent in 2012 (39.6 percent top rate plus a new 3.8 percent Medicare payroll/surtax).

Tax reform is many things, but it is NOT "raise the rates and broaden the base." Yet that's what this plan does to mid-size and smaller employers. There are a few fig leaves of tax deductions in here for these employers, but the plan overall is grossly-unfair to flow-through businesses.

Raises the cost of capital across the board. The Administration plan lengthens depreciation lives, which makes no sense considering the President's budget calls for another year of full business expensing. The proper policy is permanent full business expensing. Businesses should be able to deduct the cost of all business inputs in the year incurred. Lengthening depreciation lives (and, likely, amortization periods) uses inflation and the time value of money to steal these ordinary business deductions. A deduction delayed is a deduction denied. More importantly, it incents business to consume rather than to invest in new plant and equipment.

Raises taxes selectively on producers of American energy. For a plan that claims to abhor "picking winners and losers," the Administration outline sure does pick one loser--energy producers. It reads them out of the Section 199 exclusion, repeals LIFO, curtails legitimate cost recovery, and increases the double taxation of international income (a sore point for the industry). At a time when news reports are speculating about a $5 gallon of gasoline, why is the Administration raising the cost of energy for every American family? Picks a winner--green energy manufacturers. All manufacturers are picked as winners by this plan, with a new effective marginal rate of 25 percent. Green energy producers are given super-winner status, with a set of new tax incentives. All business income should be taxed one time, at the same rate.

Raises capital gains taxes under the guise of business tax reform. In an outlier, the Administration proposal highlights taxing carried interest capital gains as ordinary income. What does this have to do with business tax reform? Capital gains earned by an investment partnership manager has nothing to do with this discussion, which merely serves to highlight that this effort is just a tax revenue money grab.

In short, the Administration plan is a net tax increase on America's job creators with very little in the way of rate reduction. In total, it would kill jobs and retard economic growth.

Read more: http://www.atr.org/obamas-business-tax-reform-hike-disguise-a6739#ixzz1n9IcN7l9

[aesthetics]

many multinational corporations are pay negative tax amounts in the usa (as in receiving government subsidies exceeding their taxes) so it has absolutely nothing to do with taxes for why labor has been shifted over into the third world.