Pres.Obama Puts 2009 Global Tax Plan Into Action

Republicans Against Reform, want tax havens, tax competition

Oct 29, 2009

Democrats move one step closer to reforming international tax laws, as President Barack Obama took center stage to discuss how the bill might strengthen the economy.

Conservatives argued, new changes in tax policy can only hurt American businesses and citizens by making them poorer.

A panel of Economists and tax experts held an open debate at the Cato Institute recently to discuss tax competition, and to also contest President Obama’s plea to change the existing international tax policies. In short, conservatives argued that the bill would prevent citizens from reaching their fullest financial potential, as well as prevent them from experiencing the American dream.

On May 04, 2009 in the Grand Foyer of the White House, President Barack Obama explained that the revised international tax laws would place stricter provisions on foreign tax credits, limit overseas tax deferral subsidy profits on U.S. businesses, and allow the IRS to collect more information about offshore accounts by requiring overseas banks to submit 1099s for American account holders.

It has been five months since President Obama announced publicly his plans to reform the U.S. international tax laws, which conservatives believe not only change the U.S. tax code significantly, but also infringes upon their right to financial privacy, as well as hinder tax competition among U.S. companies.

“Tax competition brings great benefits to all society and not just to those who directly take advantage of it,” explained one Cato panelist, Richard Teather, a senior lecturer in Tax Law at Bournemouth University." Tax competition is the use by governments of low effective tax rates to attract capital and business activity to their country.”

President Obama acknowledged the fact that the wealth of our nation relies heavily upon the growth of American businesses, but admits more need to be done to diminish the abuse of tax heavens.

President Obama explains Reasons for International Tax Law Reform

“Nobody likes paying taxes, particularly in times of economic stress,” President Obama said. “But most Americans meet their responsibilities because they understand that it's an obligation of citizenship, necessary to pay the costs of our common defense and our mutual well-being. And yet, even as most American citizens and businesses meet these responsibilities, there are others who are shirking theirs,” which the White House transcript noted.

Obama says he understands the importance of American businesses being able to reach global markets, because it is one way to strengthen the American economy. However, he argued the way to ensure American companies remain competitive in the world is to prevent the abuse of tax havens and to make sure american companies are not rewarded for moving American jobs overseas, as the White House transcript revealed.

“Global economic growth and personal freedom are under attack by governments and international organizations seeking to squelch financial privacy and tax competition,” explained Cato panelists Richard Rahn, an adjunct scholar and Veronique de Rugy, a policy analyst at the Cato Institute. “High taxes on capital create an increasing drag on growth as capital mobility increases. Opposition to international tax competition is wrapped in the language of economics, but seems to stem mainly from political concerns.”

Rhan and Rugy argued that privacy rights and international tax competition are good , because they place constraints on governments' power to monopolize. Also, they argued that high tax nations and organizations, such as the European Union welcome international agreements, as a way to escape their limitation of powers all at the expense of prosperity and freedom. However, there are others who view this in a different light..

The Organization for Economic Co-operation and Development (OECD) released a press statement earlier this year stating, “Competitive forces have encouraged countries to make their tax systems more attractive to investors. However, some tax practices are anti-competitive and undermine fair competition and public confidence in tax systems. "

As a coloborative effort, OECD and non-OECD economies say they are banning together to address harmful tax practices through improving transparency and establishing effective ways to exchange information, as they join the Global Forum.

The International Tax Gap

It is believed that the federal tax gap is attributed to offshore tax abuse, which approximately incurs a $100 billion per year, says Carl Levin (MI-D), in a press release written February 20, 2009.

International Tax Law Revision Benefits

President Obama believes the new tax revisions would save American taxpayers $210 billion over a period of ten years, reduce the deficit, provide relief for American working families, as well as cut taxes for legitimate businesses, which the White House transcript notes.

“We're putting a middle class tax cut in the pockets of 95 percent of working families, and we're providing a $2,500 annual tax credit to put the dream of a college degree or advanced training within the reach for more students," President Obama explained. “We're providing a tax credit worth up to $8,000 for first-time home buyers to help more Americans own a piece of the American Dream and to strengthen the housing market, according to the White House, Office of the Press Secretary. International tax law revisions are not expected to go into effect, until 2011.

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