Jackson County Democrats

In remarks at the White House, Obama said, "We're beginning to restore fairness and balance to the tax code," and he called the steps "a down payment" on the broader tax reform he promised during last year's campaign.

But U.S. multinational corporations have criticized the proposals, which Obama said today would end the use of "illegal overseas tax havens, close loopholes, and make it more profitable for companies to create jobs" in the United States." Many U.S. companies with overseas operations say the measures would effectively raise a U.S. corporate tax rate that is already far higher than those in Europe and other parts of the world. The U.S. Chamber of Commerce issued a statement today opposing Obama's plans.

Taken together, Obama said, the measures will bring the government $210 billion over the next decade, money he said could be used to help close the budget deficit and "provide tax breaks to U.S. companies that play by the rules." The steps are included in Obama's $3.4 trillion budget and will be detailed in Congress later this week.

The administration hopes to have legislation passed this year making the proposals law, White House spokesman Robert Gibbs told reporters at his press briefing this afternoon.

A Government Accountability Office study released in January found that 83 of the 100 largest U.S. corporations have subsidiaries in tax havens, most notably the Cayman Islands, Bermuda and Ireland.

By doing so, major U.S. corporations pay taxes on a fraction of their profits. According to 2004 numbers, the most recent the administration has on hand, U.S. multinationals paid an effective tax rate of 2.3 percent on $700 billion in profits.

Obama plans to eliminate companies' ability to defer tax payments on profits that result from overseas investments; those payments now can be deducted immediately from their tax bills.

In addition, the administration will make it more difficult for companies to inflate tax payments made to foreign governments, which they can write off against their U.S. tax bills. The administration estimates that those two measures alone will raise an additional $103 billion over the next decade.

More than 200 U.S. companies and trade groups have signed a letter to congressional leaders asking them to oppose Obama's plan to repeal the provision that allows them to defer U.S. tax payments on overseas profits.

The letter, signed by such companies as Alcoa, General Electric, McDonald's and Microsoft, warns that eliminating the deferral rules will put them at a disadvantage against foreign companies that do not have to pay both national and foreign taxes on overseas operations.

The group Americans for Tax Reform said removing the deferral would amount to double-taxing U.S. corporate profits -- once abroad, once at home. The group favors a tax code where U.S. companies would pay taxes on overseas profits only in those countries where they are realized, as European multinationals operate now.

But Obama, who made the announcement with Treasury Secretary Timothy F. Geithner, said the deferral rule gives U.S. companies with overseas operations tax advantages over those companies that do not operate abroad.

"It's a tax code that says you should pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, New York," Obama said.

Administration officials said the president also intends to eliminate the corporate practice of hiding profits by moving them from one offshore subsidiary to another.

He will also direct the Internal Revenue Service to more closely scrutinize the tax returns of individuals with offshore accounts and investments, which are often used to avoid paying U.S. taxes.

To enforce the steps, Obama has included funding in the budget for an additional 800 full-time IRS agents. He will also direct the government to step up prosecution of companies and individuals who violate the tax code.

In addition to opposition from multinational corporations, Obama also heard concerns from Caribbean leaders at the Summit of the Americas last month that his plans to close offshore tax loopholes could undermine their growing financial sectors.