Alongside Treasury secretary Tim Geithner today, Obama announced his plan to close offshore international tax loopholes for businesses and wealthy individuals that harbor cash in offshore accounts. The plan will be part of the budget his administration releases later this week. Here’s what you need to know:
Is this a new idea? No. Obama mentioned his intention to close the loopholes several times during the campaign.
What loopholes are we talking about? Obama hopes to end the practice of American companies with overseas arms avoiding profit taxes if they put the money back into their foreign operations, and the practice of businesses and individuals legally hiding money in offshore accounts.
What good will it do? In addition to eliminating one incentive for companies to move jobs overseas, according to Obama’s team, it will raise $210 billion in tax revenue over the next ten years.
Does it have foes? According to the Times, “about 200 companies and trade associations, including Microsoft Corp., General Electric Co. and the U.S. Chamber of Commerce, signed a letter stating that the proposed changes to the tax code would put them at a disadvantage with their rivals.”
How serious is this? “If financial institutions don’t cooperate with us, we will assume they are sheltering money in tax havens and act accordingly,” Obama said in the press conference.