President Obama wants to expand the budget for infrastructure in the United States to $478 billion, which would in part be paid for by a one-time 14-percent tax on foreign profits by U.S. companies. The proposal, which is set to be unveiled Monday, will also call on U.S. companies to pay a 19 percent tax on all foreign earnings, although they would receive credit for any foreign taxes paid, reports Reuters. “After this initial payment, foreign earnings could be reinvested in the U.S. without additional tax, which would level the playing field, and encourage firms to create jobs here at home,” a White House official said.
The one-time tax on foreign profits that companies have been racking up abroad is “far lower than the current top corporate tax rate of 35 percent,” points out the Washington Post. Under current law, the profits that companies make abroad are only subject to federal taxes once they are repatriated to the United States. That’s why many companies choose to just keep that money abroad.
Obama’s new proposals “largely add detail to plans he already has outlined in past years. They underscore the administration’s heightened interest this year in reaching a deal with Republicans on a business tax overhaul, and could help to propel negotiations over legislation,” notes the Wall Street Journal.
Taxing foreign profits is just the latest example of how the 10-year budget that Obama will propose on Monday is focused on addressing income inequality by adding almost $6 trillion to the debt. The New York Times explains:
The central question Mr. Obama will pose is this: Should Washington worry about what may be the defining economic issue of the era—the rising gap between the rich and everyone else—or should policy makers address a mountain of debt that the White House hopes to control but not reduce?
Needless to say, Republicans are not very happy with certain details of the plan. While some in the GOP have been willing to discuss taxing foreign profits to fund domestic infrastructure works, they have proposed a much lower rate.
“What I think the president is trying to do here is to, again, exploit envy economics,” said Republican Rep. Paul Ryan of Wisconsin, the chairman of the Ways and Means Committee, according to the Associated Press. “This top-down redistribution doesn’t work.”