The White House will propose taxing the foreign profits of American-based companies in order to fund infrastructure programs, a White House official confirmed on Sunday.
{mosads}Those taxes will be included in the president’s fiscal 2016 budget, which will be announced on Monday, and also put more meat on President Obama’s years-old framework for revamping the tax system for U.S. businesses.
The first tax, 14 percent on the roughly $2 trillion that U.S. multinational corporations have stashed offshore, is part of the budget’s $478 billion plan to help shore up the Highway Trust Fund.
The tax on offshore profits would raise $238 billion of that funding for roads and would be imposed whether companies bring the profits to the U.S. or not.
The second tax, of 19 percent, would apply to future foreign earnings.
“As part of his budget, the president will propose a significant investment to repair our crumbling roads and bridges, and modernize our infrastructure so businesses can create good jobs here at home,” the official said by email.
“These investments would be paid for by closing tax loopholes as part of reforming the business tax rules to level the playing field and make sure everyone pays their fair share,” the official said.
But while the proposals do flesh out the president’s tax reform plan, there’s reason to believe Republicans won’t rush to embrace them.
Currently, U.S. corporations pay a top rate of 35 percent, among the highest in the industrialized world. Companies also have to pay that top rate on income made anywhere in the world, something the business community has long called on Washington to change.
At the same time, companies can hold off on paying taxes on their offshore income until they bring the money back to the U.S. — a set-up that has spurred corporations to keep an increasing amount of profits abroad.
The White House official added that the president’s budget proposal will also include measures to “crack down” on companies that shift their headquarters overseas to avoid U.S. taxes, referred to as “inversions.” Bloomberg first reported the new tax proposals.
Both Republicans and Democrats want to bring down that top corporate rate, and GOP lawmakers have long urged Obama to put more details into his tax reform plan. Some GOP officials have also sounded open to using the proposals.
Republicans want to bring the top corporate rate to 25 percent, while Obama has floated a top rate of 28 percent and a 25 percent rate for manufacturers.
The Obama administration has said that because the two parties have more intractable differences when it comes to the individual tax system, congressional Republicans should work with them on business tax reform. That would include helping out the businesses that pay taxes through the individual system.
“We want to work with this administration to see if we can find common ground on certain aspects of tax reform. And we want to exhaust that possibility,” House Ways and Means Committee Chairman Paul Ryan (R-Wis.) said Sunday on NBC’s “Meet the Press.”
“And if and when that possibility is exhausted, then we will put out what we think ought to be done.”
But that doesn’t mean that Republicans, or the business community, will be satisfied with the more detailed proposals out of the administration. Neither were particularly big fans of a tax reform plan from former House Ways and Means Committee Chairman Dave Camp (R-Mich.) that treated offshore corporate profits more generously.
— This report was updated at 7:12 p.m.