10Minutes on international tax increases

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10Minutes on international tax increases explores the significant proposals to change the taxation of US multinational corporations highlighted in President Barack Obama's proposed fiscal year 2010 budget.

Stemming from President Obama's campaign pledge to "repeal tax breaks and loopholes that reward corporations that retain their earnings overseas," the budget calls for a 10-year tax increase of $210 billion generated through international tax measures -- with changes to deferral expected to be a major element of these proposals.

The stakes are high in this debate over the future of our international tax system. With nearly half of the income of US multinationals earned by their foreign affiliates, these proposed changes could substantially increase tax burdens and create challenges for US companies competing in global markets. In addition, since many US jobs depend on US operations in foreign markets, increased taxation of foreign operations could put these jobs at risk, contrary to policymakers' desires to maintain and increase jobs at home.

Highlights

• President Obama’s new budget proposes $210 billion in revenue increases over 10 years generated through international tax measures.
• The president proposes to severely restrict or indirectly limit the current “deferral” rules under which foreign earnings of US companies are not subject to US tax until repatriated to the United States.
• With nearly half of the income of US multinationals earned by their foreign affiliates, these proposed changes would increase tax burdens and create challenges for US companies competing in global markets.

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