Senator Seeks to Overhaul U.S. Tax Code for Multinational Corporations ; Current Law Encourages Executives to Keep Jobs and Profit Overseas

Article excerpt

The legislation would permanently exempt much of the profits earned by American corporate subsidiaries in foreign countries.

The chairman of the powerful Senate Finance Committee has released a long-awaited plan to overhaul the United States tax code for multinational corporations, trying to jump-start an effort to stem the flow of jobs and money abroad.

The legislation, offered Tuesday by the chairman, Max Baucus, Democrat of Montana, would permanently exempt much of the profit earned by American corporate subsidiaries in foreign countries, but it would immediately tax profit from goods and services sold in the United States from such subsidiaries.

It would establish a temporary 20 percent tax rate on billions of dollars in corporate earnings that have been parked abroad and would order all such earnings to be taxed, payable over eight years, creating a one-time windfall of more than $200 billion for the Treasury.

The idea is to end the "lockout effect" of the current tax code, which encourages companies to move operations to low-cost jurisdictions, sell into the United States and park profits overseas indefinitely.

The proposals "provide a path forward on tax reform," Mr. Baucus said. "Some are Democratic ideas. Some are Republican ideas. The common link is they are all ideas worth exploring."

At the beginning of the year, Republican leaders vowed to overhaul the entire tax code by the end of 2014, but that push has stalled. Representative Dave Camp of Michigan, chairman of the House Ways and Means Committee, which originates all federal tax legislation, has all but given up on his pledge to draft a comprehensive tax bill this year.

"The reality is tax reform is so byzantine, so complicated, you're not going to do it in 15 minutes," said Senator Ron Wyden, Democrat of Oregon, a senior Finance Committee member. "This is a big rock to push up the hill."

But while there is little support for taking on popular individual tax breaks like those for mortgage interest and charitable giving, there is broad bipartisan consensus that the corporate tax code is outdated and overly complex, with a 35 percent tax rate that is the highest in the developed world. The Obama administration has released its own corporate tax plan, as has Mr. Camp.

Standing in the way is the insistence on the part of lawmakers like Mr. Baucus that any corporate tax overhaul be part of a comprehensive plan that also simplifies the individual tax code and helps the half of businesses that file through the individual code. …