Reagan to Request End of Dual Corporate Taxation
Six states - California, Alaska, Idaho, Montana, New Hampshire and North Dakota - would be affected immediately.
Those states now consider a corporation's entire earnings, foreign and domestic, in determining the amount that is subject to state corporate taxes. California has by far the biggest stake in the debate, up to $500 million a year.
West European nations and Japan have complained repeatedly that the practice - known as unitary taxation - is unfair.
In a written statement, Reagan said it was time for the federal government to endorse legislation to require that ""multinationals be taxed by states only on income derived from the territory of the United States'' and establish rules for equitable taxation of dividends paid to U.S. corporations by their foreign subsidiaries.
Last July, the British Parliament passed legislation enabling the government to withdraw tax breaks from U.S. companies headquartered in states enforcing unitary taxation.
But in a statement following Reagan's announcement, the British government welcomed the president's proposal and said it would delay reprisals against U.S. companies if the new legislation was introduced by the end of this year and took effect by December 1986.
Reagan said the unitary taxation issue had been under consideration almost since he took office.
""We hoped that by this time these principles would have been enacted by the various states that have unitary taxation,'' he added. Since they have not, Reagan said, he had instructed the Treasury Department to prepare legislation and negotiate for agreements that would end double taxation of corporate income. …