WASHINGTON: 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.
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 (GE.N), Microsoft (MSFT.O), Pfizer Inc (PFE.N) and Apple Inc (AAPL.O).
He will also seek to impose a 19 percent tax on U.S. companies’ future foreign earnings, the White House said.
At present, those earnings are supposed to be taxed at a 35-percent rate, but many companies avoid that through the loophole that defers taxation on active income that is not brought into the United States, or repatriated.
The $238 billion raised from the one-time tax would fund repairs and improvements to roads, bridges, transit systems and freight networks that would replenish the Highway Trust Fund as part of a $478 billion package, 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.
Obama’s budget will set a spending target of $4 trillion for fiscal year 2016, including a $474 billion deficit, which would represent a manageable 2.5 percent of U.S. Gross Domestic Product, The New York Times reported on Sunday. The budget also includes $105 million for “trade adjustment assistance” to help workers who have been affected by free trade pacts, it said.
Obama’s latest tax proposals are part of a broad tax reform package that he says is meant to help middle-income Americans.
