President Barack Obama is planning a tax increase on U.S. multinational businesses that would add a total of $276 billion to the U.S. budget, according to The Washington Post.
The 2015 plan includes six new measures to plug leaks in the tax code that multinationals are using to avoid paying the 35 percent federal corporate tax rate imposed by the U.S. government – the highest in the industrial world.
Both sides of the debate want changes to the tax code. Corporate executives have been arguing for years for a reduction in the tax rate, but those in favor of the President’s plan argue that most multinationals don’t pay the 35 percent rate anyway, by exploiting loopholes in the tax code. GE, for example, reported that it only paid an effective tax rate of 4.2 percent in it’s most recent annual filing, according to the news source.
MSN Money explained that the plan isn’t likely to find any traction in a congress that has trouble agreeing even on general tax policy, let alone specifics. Manal Corwin, national leader of the international tax practice at KPMG LLP in Washington, explained to the news source that, in actuality, the plan is intended to set down a marker in the national tax debate.
“I don’t know that anybody’s predicting that we’re suddenly going to see tax reform happen,” said Corwin. “There are certain themes that seem to be repeating themselves.”
Under the current tax code, U.S.-based multinationals face a full 35 percent tax rate for income they make around the world after the tax they pay to local governments. As other countries have reduced their tax rates, businesses have stockpiled an estimated $2 trillion in untaxed, offshore profits. While some feel that the U.S. should lower its tax rates in order to encourage businesses to repatriate their money, others feel that the loopholes through which these businesses are avoiding the tax should be closed.
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