The cost of Obama’s overseas tax hike

When President [Obama announced his intention]( earlier this week to “level the playing field” for U.S. labor by ending tax breaks for companies that ship jobs overseas, we knew that tech would be one of the sectors with the most to lose.

But it’s not just jobs. Major Web companies like eBay and Google have been steadily expanding their foreign operations, which now account for more than half of their annual revenue. Establishing a business presence overseas, even if in some cases if it’s little more than a billing address, can provide a substantial tax benefit.

The federal statutory tax rate stands at 35 percent, but companies have been able to significantly lower their effective tax rate through deferrals and credits for taxes paid overseas. Obama describes those benefits as loopholes that give companies incentives to push jobs overseas and evade taxes they rightfully owe.

So how would Obama’s plan affect the bottom line? Barclays analyst Doug Anmuth ran some preliminary numbers.

Anmuth estimated the tax rate on international pretax income for Google, eBay and Amazon in the low to mid single digits in 2008. Based on Obama’s plan to bring those rates in line with the 35 percent currently assessed on U.S. operations, he projects that Google’s EPS would decline by 11 percent in 2011, when the proposed tax changes would take effect. That same year, eBay’s EPS would tumble 19 percent, and Amazon would fall off 9.2 percent from current estimates.

Does that sound like a policy they could get behind?

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