By proposing to rein in offshore tax havens, President Obama has the right idea for fixing a huge flaw in the way companies are taxed.But that's just the first piece of the puzzle that he'll put together this year to overhaul business taxation.
At first blush -- and by measuring the high pitch and decibel level of the howls from business lobbyists -- it would be easy to conclude the proposal to crack down on offshore tax havens will have a rough time in Congress, particularly in the more pro-business Senate. But such judgments might be a tad premature.
Legislation on offshore tax havens won't be decided in a vacuum. Obama will push to tighten multiple aspects of business taxes, such as toughening worker classification rules, ending the domestic production deduction and eliminating some breaks for oil and gas firms. These proposals won't be any more popular with businesses than Obama's offshore tax plan, however, so he'll have to agree to some tax sweeteners that will offset at least some of the higher taxes caused by the closing of loopholes.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
What we aren't sure of yet is exactly how much Obama is willing to give business in return. His opening gambit was to offer a permanent extension of the research and development tax credit. A permanent RD credit is definitely on the business community's wish list and has broad support in Congress. Plus, proposing to reward businesses for spending money domestically on research activities is a nice juxtaposition to the plan to rein in the ability of corporations to defer tax on foreign income.
But it isn'tnearly enough, and it's hard to believe that Obama isn't prepared to cough up more. What many businesses, especially big firms, want is a deep cut in the 35% top corporate tax rate. Companies have been angling for a rate reduction for years, arguing that their taxes are among the highest for industrialized countries. Even the Democratic chairman of the House Ways and Means Committee agrees: Rep. Charles Rangel (D-NY) has said he favors dropping the rate to 30.5%.
Obama hasn't played that card yet, but eventually he'll have to if he wants a bill. So for now, take all of the business community's complaints about Obama's proposal on offshore tax havens with a grain of salt. It's only the first act in a much longer play that's likely to end with both sides getting something in the bargain.
-
Stocks Chop as the Unemployment Rate Jumps: Stock Market TodayNovember job growth was stronger than expected, but sharp losses in October and a rising unemployment rate are worrying market participants.
-
Should You Renew Your CD?With rate cuts impacting earnings, we examine if now is a wise time to renew CDs.
-
7 Ways to Plan Now to Save on Medicare IRMAA Surcharges LaterUnderstand the critical two-year lookback period and why aggressive planning before you enroll in Medicare is the most effective way to minimize IRMAA.
-
Law Reversal Looming? Trump Eyes 2026 Gambling Winnings Tax ChangeTax Deductions It's no secret that the IRS is coming after your gambling winnings in 2026. But how long will that last?
-
Is a New $25,000 Health Care Tax Deduction Coming in 2026?Tax Policy A proposal from GOP Sen. Josh Hawley adds to the chatter about health care affordability.
-
Are New Trump $2,000 Stimulus Payments Coming in 2026? What to Know NowTax Policy A promise of $2,000 tariff dividend checks is raising questions and fueling confusion.
-
Could Tax Savings Make a 50-Year Mortgage Worth It?Buying a Home The 50-year mortgage proposal by Trump aims to address the housing affordability crisis with lower monthly mortgage payments. But what does that mean for your taxes?
-
Emergency Tax Bill Ends $6,000 Senior Deduction and Tip, Overtime Tax Breaks in D.C.Tax Law Here’s how state tax conformity rules could immediately raise your income tax liability.
-
Standard Deduction 2026 Amounts Are HereTax Breaks What is the standard deduction for your filing status in 2026?
-
Three Popular Tax Breaks Are Gone for Good in 2026Tax Breaks Here's a list of federal tax deductions and credits that you can't claim in the 2026 tax year. High-income earners could also get hit by a 'surprise' tax bill.
-
Money for Your Kids? Three Ways Trump's ‘Big Beautiful Bill’ Impacts Your Child's FinancesTax Tips The Trump tax bill could help your child with future education and homebuying costs. Here’s how.
