Score another one for lobbyists U.S. Chamber of Commerce, NASSCOM and Multinational corporations who are manipulating international and U.S. corporate tax codes. The Obama administration shelved corporate tax reform to remove the loopholes for the tax gains corporations get to offshore outsource your job.
The Obama administration has shelved the proposal in the face of intense pressure from business. A key part of the tax plan, and a key beef of industry, was a proposal to reform the part of the tax code that allows companies to defer paying taxes on profits earned from overseas investments.
What happens with Multinational corporations is they keep profits offshore, move jobs, production offshore and thus pay lower taxes on it. These loopholes basically enable corporations to avoid U.S. taxes and incentivize the offshore outsourcing of your job.
To read the original proposals as well as some GAO analysis on how these loopholes work, read What's the Deal On That Little Tax Break to Offshore Outsource your Job? and of that proposal, the already built in loopholes that it had (which is now killed outright).
Now, of course you won't read about this in the Wall Street Journal, but the plan originally was to lower the U.S. corporate domestic tax code and there was no double tax and brew ha ha you're reading now in the business journals. Nope, it was all about stop incentivizing the keeping of profits, moving production offshore as well as incorporation in a tax haven to avoid paying U.S. taxes. Of course corporations don't like that because they are all about manipulating national tax codes and wage arbitrage. Damn if they have to invest in their employees or keep jobs in the U.S.
Or, they suggested, you could replace America’s sky-high 35 percent corporate income tax with a value-added tax of 5 to 6 percent. And that idea hints at the other reason why the White House may have scuttled their original tax plan. Obama supporters and fellow travelers have been launching trial balloons all over Washington promoting a VAT to deal with Uncle Sam’s huge budget deficits.
(Watch out, the above blog post is absurd in claiming somehow U.S. corporations must have tax incentives to offshore outsource your job, we're just linking it to show the VAT idea is making the rounds and from my own analysis, a VAT could be quite a nice weapon to deal with the trade deficit).
The trade reform group has promoted a VAT to deal with at the border tax adjustments.