President Barack Obama on Monday unveiled a fiscal 2016 budget blueprint that proposed to tax the $2 trillion in earnings held by American companies offshore as part of a set of revenue changes that would generally increase taxes on the wealthy and lower them for the middle class.
His budget plan includes:
- A one time 14 Percent Tax would on Foreign Profits.
- This is acts estimated to raise $268 billion to help pay for a $478 billion, six-year re-authorization of the Highway Trust Fund.
- A subsequent 19 Percent Tax on American firms’ Future Foreign Profits.
- Raising the top capital gains rate to 28 percent.
- up from the current rate of 23.2 percent, which would bring in some $208 billion over a decade.
- Elimination of the Estate Tax “Stepped-Up Basis” rule, that allows taxpayers to escape paying income taxes on profits earned on capital assets that are held until the individual’s death.
- A new tax of seven basis points (0.07 percent) on the liabilities of all financial institutions with $50 billion or more in total consolidated assets.
- this is estimated to raise $112 billion over 10 years and
- Deter financial risk-taking.
“Both Democrats and Republicans have argued that our tax code is riddled with wasteful, complicated loopholes that make it harder to invest here and encourage companies to keep profits abroad,” Obama said in a statement accompanying the budget.
According to Bloomberg, U.S. companies including General Electric Co., Microsoft Corp. and Pfizer Inc. would pay $506 Billion over the next decade under President Barack Obama’s proposal to encourage them to bring back profits held overseas. President Obama’s budget estimates the stockpile of corporate earnings outside the U.S. at about $2 trillion.
U.S. business lobbyists have been seeking policy changes to help repatriate profits at a rate they deem acceptable.
Tax changes to bring back more corporate profits to the U.S. would let companies spend more at home on dividends, buybacks, acquisitions, capital investments and workers, said Philip Orlando, chief equity strategist for Federated Global Investment Management, which oversees about $360 billion in stocks, bonds and cash.
According to Orlando, the Republican-controlled Congress probably would negotiate for a lower rate than 14 percent for the one-time repatriation and for the tax on foreign earnings to be the same as a lowered domestic corporate rate, however, President Obama’s willingness to make a formal proposal “is amazingly positive.”
Read more at: Tax Times blog
