Kerry Statement on President Obama's Offshore Tax Proposals
Senator John Kerry (D-Mass.), a senior member of the Senate Finance Committee and author of comprehensive deferral legislation, made the following comment after President Obama today announced several international tax policy proposals as part of his budget.
"For five years we've been pushing to reform the tax code to end deferral and reward companies that create jobs at home not those that hide money offshore," said Sen. Kerry. "I'm glad President Obama is taking action on an issue that has long needed attention and I will work closely with the administration to simplify and reform our international tax system."
Under U.S. tax law, a company in the process of deciding whether to locate production or services here or in a foreign low-tax haven is given a substantial tax incentive not only to move jobs overseas, but to reinvest profits permanently, instead of bringing the profits back to reinvest in the United States.
President Obama announced a proposal that would end the practice of deferral - providing a tax advantage to companies that invest and create jobs overseas. Under Obama's plan, companies would no longer be able to take deductions, with the exception of research and development expenses, on their U.S. tax returns supporting offshore investments until taxes are paid on offshore profits.
Since 2004, Senator Kerry has raised the issue of international tax reform and fought to close offshore loopholes. He led the fight to close two loopholes in the last Congress and continues to raise international tax reform issues, including offshore evasion, at Senate Finance Committee hearings.
Senator Kerry's efforts include:
· Introducing a corporate tax reform proposal based on deferral in 2004. Kerry advocated for the elimination of deferral and using the revenue saved to lower the corporate tax rate;
· Introducing comprehensive deferral legislation in 2006 and 2007;
· Introducing S. 2199, the Offshore Deferred Compensation Reform Act of 2007, which became public law 110-343. This legislation, which would eliminate the offshore deferral of compensation, was introduced in response to press accounts that hedge fund managers were deferring large amounts of compensation offshore, almost as if they had unlimited individual retirement accounts. The legislation is not limited to hedge fund managers. It also applies to corporate executives. This provision was included in the Tax Extenders and Alternative Minimum Tax Relief Act of 2008, which was part of the Emergency Economic Stabilization Act of 2008. It raises $25 billion over ten years. It was signed into law on October 3, 2008.
Introducing S. 2775, the Fair Share Act of 2008, now public law 110- 245, in March of 2008. The Fair Share Act of 2008 would end the practice of U.S. government contractors setting up shell companies in foreign jurisdictions to avoid payroll taxes. It was included in H.R. 6081, the Heroes Earnings Assistance and Relief Tax (HEART) Act of 2008, which was signed into law on June 17, 2008.