The White House sees heavier U.S. taxes on multinational corporations as a gain for average Americans.
As part of his proposed budget, President Barack Obama wants to overhaul corporate taxes, while funneling revenue into an update of the nation's aging infrastructure. The plan includes a one-time 14 percent tax on about $2 trillion of overseas profits accumulated by companies outside the U.S., as well as a 19 percent minimum tax on future foreign profits.
Linking taxes on U.S. companies' foreign profits with improving the nation's roads, bridges, airports and other public works is likely aimed at gaining support from Republicans as well as Democrats, given the GOP's stated support for infrastructure development. Still, some Republicans panned the idea, with Rep. Pat Tiberi (R.-Ohio) calling it a way to "fund more spending by our already bloated government."
Not surprisingly, Obama's tax proposal is also already meeting resistance from the corporations it is targeting. Those include some of the country's biggest companies.
"The international tax proposals, which would increase taxes on U.S. companies competing abroad by more than a half a trillion dollars in the next 1o years, are out of step with the rest of the world and would likely lead to more takeovers of U.S. companies by foreign companies who would not be subject to these rules," the Alliance for Competitive Taxation, a trade group for American businesses including Coca-Cola (KO), General Electric (GE), Google (GOOG), JPMorgan Chase (JPM), Pfizer (PFE) and Walmart (WMT), said in a statement.
Earmarking those taxes for improving the country's infrastructure would be a positive because America's aging highways and bridges could eventually hinder economic growth, supporters of Obama's tax plan contend.
"The revenue raised by the budget's transition tax on profits that multinational corporations hold overseas (which is part of the plan's larger corporate-tax reform proposal) would finance long-overdue investments to modernize the aging U.S. infrastructure, which otherwise will exert a growing drag on growth," said Robert Greenstein, an economist with the left-leaning Center on Budget and Policy Priorities, said in a statement.
The plan to tax overseas profits is part of Obama's fiscal 2016 budget plan, which he's sending to Congress this week. Many of the tax proposals in the budget were introduced by Obama earlier this month in his State of the Union address, such as his plan to close the so-called "angel of death" loophole, a tax break that some say unfairly benefits the wealthiest Americans.
Obama's plan to reinvest taxes on overseas corporate taxes would help pay for a six-year $478 billion upgrade on the country's infrastructure. That would go some distance to plugging the needed improvements to America's infrastructure, but still falls short of the $3.6 trillion that the American Society of Civil Engineers says is needed to upgrade everything from levees to rail lines.
Overall, America's infrastructure was given a D+ rating by the ASCE in 2013, with the group's president noting that many of the country's systems "are simply overwhelmed or worn out."
Obama's plan is similar to a bipartisan Senate plan for tax repatriation unveiled last week by Sens. Rand Paul (R-Ky.) and Barbara Boxer (D-Calif.) In a statement, Paul noted, "The interstate highway system is of vital importance to our economy. All across the country, bridges and roads are deficient and in need of replacement."
But that legislation, as well as Obama's proposal, is unlikely to become law, according to the Eurasia Group, a political risk consultancy. It added, "Obama's plan would levy a mandatory tax but doesn't include a wider overhaul of the corporate tax code, while the Senate scheme would be voluntary and also isn't linked to corporate tax reform."