(June 8, 2009) The California Chamber of Commerce is urging U.S. Senators Barbara Boxer and Dianne Feinstein to oppose a proposal to raise taxes on U.S. companies doing business overseas.
The Obama administration is proposing to repeal the ability of U.S. companies to defer paying tax on foreign income until those earnings have been paid. The proposal will hamper the global competitiveness of U.S. companies, impede economic growth, and result in the loss of additional jobs.
Disadvantaging U.S. Companies and Employees
The United States generally does not tax a worldwide U.S. company on the active foreign income of its separately incorporated foreign affiliates until those earnings have been paid, typically as a cash dividend to the parent company.
Because the parent company may delay payment of U.S. tax until it has received the foreign income as a dividend, this method of taxation permits deferral of U.S. tax.
U.S. companies doing business overseas add $2.5 trillion to the U.S. economy and support more than 20 million U.S. jobs, about one-fifth of the private workforce—with millions more jobs supported by small‐ and medium‐sized suppliers.
Eliminating this deferral would add $200 billion to the tax burden of affected companies, putting them at a competitive disadvantage against foreign competitors that don’t have to pay or can defer taxes in their home countries.
This means that foreign-based competitors could reinvest more, expand faster, and sell their products at lower prices than their U.S.-owned competitors. Over time, worldwide U.S. companies would be unable to profitably compete against foreign corporations, leading to reduced employment and lower wages for workers at U.S. companies.
Preserving a Competitive Edge
The CalChamber supports expansion of international trade and investment, fair and equitable market access for California products abroad, and elimination of disincentives that impede the international competitiveness of California business.
As many of the world’s major economies take steps to enhance the ability of their companies to grow, this proposed new U.S. international tax policy threatens to unfairly harm U.S. companies and make U.S. workers less secure.
The phrase “ensuring America’s competitive edge in the global marketplace” are on the lips of many federal policy makers, media members, business owners and workers these days. With the California economy showing increased signs of weakness, the CalChamber believes that all parties need to work together to spur economic growth and protecting jobs is critical – especially as it pertains to the global marketplace.
Action Needed
The CalChamber has urged members of the California congressional delegation to oppose the tax increase on overseas income and is encouraging CalChamber members to do the same.
A sample letter is available at www.calchamber.com/international.
Staff Contact: Susanne Stirling and Kyla Christoffersen