Obama touts plan to close loopholes

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WASHINGTON --- President Obama proposed Monday to raise taxes on the overseas profits of U.S. companies and to go after evaders who abuse offshore tax shelters.

In announcing a series of steps aimed at overhauling the U.S. tax code, Mr. Obama said existing law makes it possible to "pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, New York."

The proposal will be a hard sell in Congress. Sen. Max Baucus of Montana, the chairman of the tax-writing Senate Finance Committee, offered a tepid response.

"Further study is needed to assess the impact of this plan on U.S. businesses," said Mr. Baucus, a Democrat.

The president said he wants to prevent U.S. companies from deferring tax payments by keeping profits in foreign countries rather than recording them at home and called for more transparency in bank accounts that Americans hold in notorious tax havens such as the Cayman Islands.

"If financial institutions won't cooperate with us, we will assume that they are sheltering money in tax havens and act accordingly," Mr. Obama said.

Many provisions of the complicated and much-maligned tax code are worded in ways that allow people to legally cut corners. And the code is filled with language that in many circumstances authorizes legal tax end-arounds, if not pure avoidance.

Mr. Obama said his new proposals would generate an average of about $21 billion a year in new taxes. That would amount to only about 2 percent of next year's projected deficit of $1.2 trillion.

Under his plan, companies would not be able to write off domestic expenses for generating profits abroad. The goal is to reduce the incentive for U.S. companies to base all or part of their operations in other countries.

Mr. Obama said the government also is hiring nearly 800 new IRS agents to enforce the U.S. tax code.

The administration is not seeking to repeal all overseas tax benefits. Mr. Obama called his proposal "a downpayment on the larger tax reform we need to make our tax system simpler and fairer and more efficient for individuals and corporations."

Under existing laws, companies with operations overseas pay U.S. taxes only if they bring the profits back to the United States. If they keep the profits offshore, they can defer paying taxes indefinitely.


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