Corporate appeals to temper President Obama’s apparent plans around tax reform are beginning to hit Capitol Hill. Financial Executives International has written to Congressional leaders to take shots at Obama’s so-far sketchy plans referenced in his 2010 budget blueprint to make major changes in U.S. business tax policy.
“The tax provisions in President Obama’s budget would confront U.S. businesses with daunting challenges in the best of economic times,” wrote Ron Dickel, chairman of FEI’s committee on taxation. “Moreover, many of the tax policies in the budget plan would have a detrimental long-term impact on the competitiveness of U.S.-based businesses in the global economy.”
FEI is most concerned about Obama’s apparent plans to reform tax rules related to foreign business income and to repeal the last-in, first-out method of accounting for inventory. The committee is concerned changes in these areas would impede U.S. companies’ ability to compete internationally and to finance their operations.
Dickel notes Obama’s budget calls for reform of the “deferral” policy, which allows U.S. companies to postpone paying U.S. tax on foreign-earned income until the money is transferred into its U.S. coffers. The budget blueprint offers no details, but projects raising $210 billion through 2019 as a result of “international enforcement, reform deferral, and other tax reform policies.”
In his letter, Dickel tells Congressional leaders that U.S. tax rules “already include strong provisions on international business income that should diminish the concerns about abusive techniques.” He says the policy must be preserved “so long as the U.S. maintains its policy, rare among developed nations, of taxing worldwide income of U.S.-based companies.”
As for the LIFO repeal, the tax group says the 70-year-old method of inventory accounting accurately reflects income for tax purposes because it matches current revenues against current costs. The group said it also encourages companies to maintain investments in inventory and grow their businesses, which helps create jobs.