Business Leaders Speak Out on Tax Crackdown

May 4, 2009 — -- Members of the business community today are starting to sound off in opposition to President Obama's new plan to crack down on offshore tax evasion, denouncing the initiative as a "foolish" program that would do more harm than good.

Critics argue the president's effort to raise taxes on the overseas profits of U.S. companies could damage U.S. multinational corporations.

"His proposals would put American corporations at a great disadvantage, which is a very foolish policy in a competitive global marketplace," said Dan Mitchell of the Cato Institute.

Announced earlier today, the Obama administration's two-part plan would remove tax deductions for companies that take jobs overseas and reduce the amount of taxes lost to overseas tax havens.

"If financial institutions won't cooperate with us, we will assume that they are sheltering money in tax havens and act accordingly," Obama said in announcing the plan today in Washington, adding that the government will also hire 800 new IRS agents to enforce it.

Opposition had already started to build this afternoon, shortly after the president announced the new plan.

"There certainly will be opposition," predicted Phil West, an attorney with the international law firm Steptoe & Johnson LLP.

West, who served as international tax counsel for the Treasury Department under President Clinton, summarized what the opposition would argue.

"It's not fair to treat U.S. businesses worse than their foreign competitors," he said. "A lot of foreign competitors have the benefit of more liberal tax systems, and when you put U.S. companies at a competitive disadvantage, you're going to hurt the U.S. economy at the time when it can least afford it."

Senior administration officials said Sunday that in 2004, the last year that they have records for, U.S. multinational corporations raked in $700 billion in foreign earnings but paid only $16 billion in taxes -- a paltry 2.3 percent. They say the new proposals would help save $210 billion over the next decade.

"The way we make our businesses competitive is not to reward American companies operating overseas with a roughly 2 percent tax rate on foreign profit, a rate that costs taxpayers tens of billions of dollars a year," Obama stated. "The way to make American businesses competitive is not to let some citizens and businesses dodge their responsibility, while ordinary Americans pick up the slack."