Posts Tagged ‘Tax credits’
In the American Workers, State, and Business Relief Act of 2010, passed by the House last Friday, there are little observed provisions to remove tax incentives to offshore outsource your job.
The bill ties income to the foreign tax credit, so no longer can a corporation claim the tax credits yet park the actual profits money offshore in a low tax country. As one can see if one gets credits yet doesn’t have to actually pay tax on profits accrued when offshore, this encourages the movement of assets, production overseas, including jobs.
In White House Semi-English:
When a U.S. taxpayer has overseas income, taxes paid to the foreign jurisdiction can generally be credited against U.S. tax liabilities. In general, this “foreign tax credit” is available only for taxes paid on income that is taxable in the U.S. The intended result is that U.S. taxpayers with overseas income should pay no more tax on their U.S. taxable income than they would if it was all from U.S. sources. However, current rules and tax planning strategies make it possible to claim foreign tax credits for taxes paid on foreign income that is not subject to current U.S. tax. As a result, companies are able to use such credits to pay less tax on their U.S. taxable income than they would if it was all from U.S. sources – providing them with a competitive advantage over companies that invest in the United States.
In reading the bill, first pass, it does appear the White House proposal is in the bill.
The changes are is TITLE IV—REVENUE OFFSETS, Subtitle A—Foreign Provisions in H.R. 4213. The section starts on page 229 in the bill text link.
Multinational corporations will do everything in their power to strip out these changes and so will the powerful NASSCOM, or Indian offshore outsourcing business group and their U.S. lobbying counterpart, USINPAC.
Expect war from our Benedict Arnold Tech Companies such as IBM, Microsoft and HP. IBM literally has an algorithm to manipulate global tax structures and has been firing every American who isn’t nailed to their desk. HP just announced 9000 more layoffs. Amazing because the bill extended the R&D tax credit, which greatly benefits these same companies.
Meanwhile Chuck Schumer wants to tax foreign call centers. For each call transferred overseas, Schumer wants a 25¢ charge put on the call. What? No more nonsensical useless script reading rambling in your ear wasting your time and creating more frustration via the phone? Say it ain’t so!
Paul Krugman 01/26/10 New York Times
A spending freeze? That’s the brilliant response of the Obama team to their first serious political setback?
It’s appalling on every level.
It’s bad economics, depressing demand when the economy is still suffering from mass unemployment. Jonathan Zasloff writes that Obama seems to have decided to fire Tim Geithner and replace him with “the rotting corpse of Andrew Mellon” (Mellon was Herbert Hoover’s Treasury Secretary, who according to Hoover told him to “liquidate the workers, liquidate the farmers, purge the rottenness”.)
It’s bad long-run fiscal policy, shifting attention away from the essential need to reform health care and focusing on small change instead.
And it’s a betrayal of everything Obama’s supporters thought they were working for. Just like that, Obama has embraced and validated the Republican world-view — and more specifically, he has embraced the policy ideas of the man he defeated in 2008. A correspondent writes, “I feel like an idiot for supporting this guy.”
Now, I still cling to a fantasy: maybe, just possibly, Obama is going to tie his spending freeze to something that would actually help the economy, like an employment tax credit. (No, trivial tax breaks don’t count). There has, however, been no hint of anything like that in the reports so far. Right now, this looks like pure disaster.