WASHINGTON - President Obama pledged Monday to crack down on American companies and individuals who hide millions of dollars in offshore tax havens.
In a move likely to get the backing of a majority of Americans who don't hide their assets overseas, Obama urged Congress to approve legislation closing loopholes that could produce $210 billion in tax revenues over the next 10 years.
"The steps I am announcing today will help us deal with some of the more egregious examples of what is wrong with our tax code," Obama said, joined by Treasury Secretary Timothy Geithner at the White House.
U.S. companies are currently allowed to "defer" tax payments to the federal treasury if they reinvest taxable profits in their foreign subsidiaries. Obama says it's an unfair practice - and wants it to be the first of several tax reforms enacted on his watch.
"The way to make American businesses competitive is not to let some individuals and businesses dodge their responsibilities and let ordinary Americans pick up the slack," Obama said.
"It is the down payment on the larger tax reform we need to make our tax system simpler and fairer and more efficient for individuals and corporations," he added.
And he wants companies to create more U.S. jobs.
He called for eliminating tax breaks for outsourcing employment to low-wage countries like India and the Philippines - a head-scratching current practice.
"It's a tax code that says you should pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, New York," Obama said.
The President wants to reward companies that invest in the U.S. by extending a research and experimentation tax credit worth $74.5 billion in tax breaks over 10 years.
It is not a slam-dunk proposal, however. Obama expects a major fight with corporations, lobbyists and their supporters in Congress.
"This issue is about jobs in America and the competitiveness of American companies.
Deferral has been mischaracterized as a 'tax break' but is actually a vital mechanism providing relief for American businesses from double taxation," said Chamber of Commerce Chief Economist Marty Regalia.
"Tax increases that hurt U.S. companies' global competitiveness hurts U.S. workers here at home. A huge tax hike on U.S. employers is not the way to stimulate our economy. Congress should reject this approach," Regalia added.
The Chamber of Commerce and about 200 other organizations, lobbies and corporations have signed a petition asking Congress to kill the plan.
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