President Obama has been criticized for taking on too much. In addition to being tasked with fixing the economy, creating a new energy policy, and health care reform, today he announced that he is going to restructure the tax code, effectively closing overseas tax shelters. Over at Talking Points Memo, Robert Reich offers some strategy and reasoning as to why the White House would want to take this on now:
Two reasons, both strategic. The President needs the cooperation of many big corporations if he's going to get universal health insurance enacted this year. Many of these companies would benefit from lower health costs but they're reluctant to take on Big Pharma, big health insurance companies, and major health providers, all of whom are dead set against a provision in the emerging health insurance proposal that would allow the public to opt for a government health plan. How does it help for him to take on corporate tax havens? Because the President needs as many bargaining chips with the rest of corporate America as possible. The proposed crackdown on foreign tax avoidance is one such chip. He might be willing to take it off the table if big corporations lend him active support on health insurance.
The second reason has to do with revenues. Originally the White House had planned to pay for universal health insurance by limiting tax deductions for wealthier Americans. But the Democratic leadership nixed that source. The rich Americans who take the deductions, and the groups benefiting from the wealthy's tax-deductible expenditures on them, had enough political leverage to make it a non-starter. That means the White House has to find other sources of money.
By some measures, $700 billion or more in U.S. corporate earnings is now sitting in overseas accounts. A portion of that might be made available to help pay for universal health insurance. The Administration figures it could raise over $100 billion over ten years by preventing companies from taking immediate deductions for overseas expenses while deferring tax payments on profits there, and claiming inflated credit against American taxes for foreign taxes paid. It could raise another $95 billion by making it harder for individuals to hide their income in offshore accounts, and harder for companies to shift income from one foreign subsidiary to another in search of the lowest-tax jurisdiction.
There’s a funny line in Kill Bill Volume 2. Budd, the ex-assassin turned strip club bouncer, is getting reamed by Larry, his boss, for being late. Larry starts scratching Budd’s name off the work schedule and says “Fuckin’ with your cash is the only thing you kids seem to understand.” Based on Mr. Reich’s theory, it sounds like Mr. Obama is the strip club owner and big business is the bouncer that can’t show up on time, and yes, fuckin’ with their cash is the only thing they seem to understand.
It’ll be interesting to see how this plays out.