Tech Companies Enlist Dem Help to Beat Obama
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WASHINGTON, June 8 (Reuters) - A group of technology heavyweights, including chiefs of IBM (NYSE: IBM) and Motorola enlisted a former Clinton administration economist to beat back President Obama's plan to boost some taxes on overseas profits.
The Technology CEO Council recruited Robert J. Shapiro, a former top Commerce Department official, who wrote a report released on Monday arguing that significant jobs losses could occur under Obama's plan (see "Obama looks to crack down on offshoring tax breaks").
Last month, Obama introduced a proposal to raise $210 billion over a decade in part by tightening tax rules on income earned abroad. The administration says current policy spurs job creation overseas, while U.S.-based multinational companies say precisely the opposite is true.
"The direction of the effect is very clear: It would significantly reduce the effective post tax earnings from foreign operations and in so doing would have these so-called adverse effects," which include job losses in the U.S., Shapiro told Reuters.
A respected economist who reviewed the report, however, questioned the underlying data assumptions cited.
"Their numbers are just way out there," said Rosanne Altshuler, an economist at the Brookings-Urban Institute's Tax Policy Institute.
Current law allows companies to defer income tax until they bring the income back into the U.S., for example, in the form of dividends.
Companies can take deductions on expenses linked to income earned abroad immediately though. Obama wants to require companies to delay deductions until the foreign income is claimed.
She said she doubts the Obama administration's argument that his tax changes will save or create jobs, though and said "it is possible that it could decrease jobs."
The Shapiro report is in part based on a study by Harvard Business School Professor Mihir Desai and colleagues finding a statistical link between foreign investment by U.S. companies and domestic job creation.
When introducing Obama's deferral plan, a senior Obama administration official said the goal is to spur a company to locate a plant in Michigan instead of Malaysia.
The top U.S. corporate tax rate of 35 percent is among the highest in the world, though Obama officials say that with deductions and loopholes it is effectively much lower, at about 20 percent.
"The reality now is that companies pay very little in U.S. taxes," the senior Obama administration official said.