According to the New York Times, over 840 huge American corporations saved an estimated $265 billion because of a one-time tax break Congress passed to help bring home profits that had been hidden in overseas accounts. Below is an excerpt from the article, but you can view the full version at NYTimes.com.
The windfall resulted from a temporary tax deduction for big corporations, which were keeping billions of dollars in profits in overseas subsidiaries and out of the hands of the Internal Revenue Service.
The total amount brought back to the United States was far above some estimates, according to the data, which provides new details on the tax break.
American companies can typically defer paying taxes on foreign profits as long as they keep that money outside the United States. When companies bring the money back, they usually pay the top corporate tax rate of 35 percent.
In recent years, the biggest and wealthiest companies in the United States have increasingly set up foreign subsidiaries and used them either as foreign operations or offshore repositories.
The subsidiaries, many in offshore tax havens like the Netherlands, Ireland and the Cayman Islands, collectively held about $804 billion in foreign profits on which their American corporate parents had yet to pay any United States taxes, according to the IRS
A one-time tax holiday enacted by Congress in 2004 offered companies the chance to bring that money back at a reduced tax rate of 5.25 percent.
Some of the biggest names in corporate America decided to take advantage, in particular those in the pharmaceutical and technology industries. Pfizer brought back $37 billion, while Hewlett-Packard repatriated $14.5 billion.
In all, 843 corporations took advantage of the offer, according to recent IRS statistics of income data, bringing back $362 billion in foreign profits, paid to the parent corporations as dividends. Of that amount, $312 billion qualified for the tax break, giving those companies total tax deductions of $265 billion claimed from 2004 through 2006.
As we get closer and closer to November, the presidential candidates are continuing to make headlines. Especially when it comes to their economic views. Please enjoy the following excepts from recent coverage, and click the respective titles to read the full articles.
Obama missing chance to campaign as a tax cutter – Few people know that they'd get more under Democrats
Democratic presidential candidate Sen. Barack Obama is trying to avoid two traps that have doomed previous Democrats: Being seen as a "tax-and-spend liberal" who is soft on national security. He's making progress on one trap, but not the other.
Obama's silence on taxes is a bit puzzling, because independent analyses of his plan compared with Sen. John McCain's well-advertised tax cuts show that the vast majority of Americans would be better off under Obama than McCain.
That bears repeating: Obama would cut taxes for ordinary people more than McCain would.
According to the Tax Policy Center's analysis of the two candidates' tax plans, 80% of taxpayers would get more from Obama's cuts than from McCain's. About 95% of taxpayers would pay less under Obama than under current law (which ends many of the tax breaks passed in the past decade).
McCain and Obama on Tax Reform
Hardly anyone disagrees with this statement: The nation's tax system is a mess. The U.S. tax code is riddled with far too many deductions, credits, exemptions, exclusions, phase-ins, and phase-outs. Nobel laureate Milton Friedman noted half a century ago that constant changes in the tax code discourage long-term planning by households and businesses. He was right, but that has not stopped Democrats and Republicans from tinkering with taxes ever since the income tax was imposed in 1913.
Perhaps it is the safest forecast in politics and economics that history will repeat itself when it comes to the tax code. It's going to get even more complex next year, since both Sen. John McCain and Sen. Barack Obama are proposing major tax initiatives.
For instance, among his proposals, McCain wants to make the 2001 and 2003 tax cuts permanent (with the exception of the estate tax repeal), phase in a two-thirds increase in the dependent exemption, and offer a voluntary alternative tax with two rates and a larger standard deduction and exemption.
McCain will repeal the AMT. Wait, no ...
...not exactly. The presidential candidate has been saying he would eliminate the so-called "wealth tax" that threatens the non-wealthy. But now he supports a more modified plan.
Sen. John McCain's pledge to repeal the Alternative Minimum Tax has morphed into a promise to phase it out.
Translation: More than 4 million households would continue to pay the so-called "wealth tax" under his proposal during his term if elected. And the tax likely would remain on the books long after the presumptive Republican nominee left office.
But McCain's amended AMT policy would still end up protecting most of the folks who would be unfairly trapped by the tax, which otherwise would raise a ton of revenue from middle- and upper-middle-income families instead of the wealthy, for whom the tax was initially intended.
Obama tax plan too big a burden on rich, some say
Though the Illinois senator's plan would pump billions of dollars into the system, it also would fundamentally change how the program is funded. Many economists said the economy would be hurt by sending some rich folks' overall tax burden soaring past 60%, which one analyst said Obama's proposal would do.
His plan would work like this: Those who earn $102,000 annually or less, a figure that's adjusted each year for inflation, would continue to pay the 6.2% Social Security tax, while their employers also paid 6.2%.
Obama asks donors to help Clinton pay off debt
Sen. Barack Obama has asked top contributors to help former rival Sen. Hillary Clinton retire the debt from her failed presidential campaign, an Obama campaign source said. Obama and Clinton ran a protracted race for the Democratic presidential nomination that left Clinton with a campaign debt of more than $22 million when she bowed out this month.
About $12 million of that amount is money the senator from New York loaned to the campaign herself. Obama asked members of his National Finance Committee to contribute to Clinton's campaign if they were so inclined, but he did not direct them to do so, the Obama campaign source said Tuesday
Obama Jabs at McCain Tax Cuts
Sen. Barack Obama told a crowd of predominately white, middle class voters today that his tax plan will provide three times more relief than Sen. John McCain’s proposed cuts. He charged McCain with only helping the wealthiest families, saying that his tax cuts will only go to households earning more than $2.8 million a year.
“Now, I don’t want to embarrass anybody but how many people here make more than $2.8 million a year,” Obama asked the audience here, “If you’re there, I want to know you because we’re still fundraising!”