Sunday, February 1, 2015

President Obama's 2015 Budget To Address "Mandatory" Tax On Parked Foreign Cash -- In Return For Lower Overall Corporate Tax Rates(?)

Or, so the wags inside the Beltway are claiming, overnight.

The idea here is a twist on the infrastructure bonds I've outlined this weekend. Instead of waiting for companies like GE, Pfizer, Merck, Apple, Intel and Microsoft to voluntarily bring foreign cash back to the US at preferential tax rates, and invest them dollar for dollar in long term (50 year) bonds to build roads and bridges, our 44th President is rumored to favor a mandatory tax on all foreign cash. The wags estimate that provision alone would generate around $238 billion of needed infrastructure funding. And, the way to garner compliance from the multi-nationals here (it is thought). . . is to offer a broad roll-back on corporate tax rates -- for those companies who do actually pay the one time 14 per cent tax on all their foreign cash. Clever.

Here is the bit, from AP News Break, overnight:

. . . .The proposal improves on an idea that the administration has pushed since the summer of 2013. The administration's budget last year proposed a smaller four-year bridge and highway fund. While it paid for it by taxing accumulated foreign earnings, it did not specify a formula.

This time, the budget will call for a one-time 14 percent mandatory tax on the up to $2 trillion in estimated U.S. corporate earnings that have accumulated overseas. That would generate about $238 billion, by White House calculations. The remaining $240 billion would come from the federal Highway Trust Fund, which is financed with a gasoline tax.

The former chairman of the House Ways and Means, now-retired Rep. Dave Camp, R-Mich., proposed a similar idea last year with a lower mandatory tax, but the plan did not make headway in Congress.

At issue is how to get companies to bring back some of their foreign earnings to invest in the United States. The current 35 percent top tax rate for corporations in the United States, the highest among major economies, serves as a disincentive and many U.S. companies with overseas holdings simply keep their foreign earnings abroad and avoid the U.S. tax. . . .

This idea, a generally good one, may mean that some reasonable approximation of the repatriation credit may finally come to pass -- as it seems that large swaths of the red and the blue factions agree to the broad outlines of it. [Forgive me -- I am getting a lil' tax wonky here. . . deep snows do that to me. Okay -- time to shovel(!).]

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