Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Biden Plan Sets Tax Penalties for Companies’ Offshore Profits

Stock MarketsSep 09, 2020 01:27PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Bloomberg. WILMINGTON, DELAWARE - SEPTEMBER 04: Democratic presidential nominee Joe Biden speaks during a campaign event September 4, 2020 in Wilmington, Delaware. Biden spoke on the economy that has been worsened by the COVID-19 pandemic. (Photo by Alex Wong/Getty Images)

(Bloomberg) -- Democratic presidential nominee Joe Biden is proposing a 10% tax penalty on companies that move operations overseas and a 10% tax credit for companies that create jobs in the U.S. in a policy rollout Wednesday.

Biden, who is launching a renewed focus on economic issues with a speech in Michigan on Wednesday, also will promise to reverse Trump administration policies that his campaign said amount to “loopholes” that allow offshoring to take place.

The former vice president will also pledge to take executive action during his first week in office to direct the federal government to buy American goods and support American supply chains in their procurement processes, his campaign said.

Biden’s proposals echo President Donald Trump’s 2016 campaign push to focus on reviving manufacturing in the U.S. and creating more U.S. jobs. Trump’s 2017 tax law was his signature legislative achievement. But the economic strength he planned to run on for re-election collapsed tn the spring when the coronavirus began to cause shutdowns across the country.

The policies are part of a broader economic push from Biden in a crucial battleground state as polls show voters about evenly split on which candidate, Biden or Trump, they trust more to manage the economy. Until recently, Trump had a reliable lead on only that issue. But the coronavirus pandemic brought job losses and manufacturing contraction that cut into that lead.

Biden’s proposal to target offshore profits adds to a previously announced plan to require corporations to pay a minimum 15% tax on their domestic profits. The combination would greatly inhibit companies’ ability to shift income and tax breaks between countries to avoid paying levies in the U.S. and abroad.

Biden will also say, according to his campaign, that Trump has broken his promises to bring jobs and profits back to the U.S.

“Offshoring, outsourcing, Buy American. These are areas where Donald Trump’s record has not been remotely matched by the reality,” senior policy adviser Jake Sullivan said in an interview ahead of the announcement.

Biden will propose a 28% corporate tax rate plus a 10% penalty surtax on the profits from any production by a U.S. company overseas for sale on American soil, making the overall tax rate on those profits 30.8%. The penalty will also apply to call centers and services that a U.S. company locates overseas but that serve the U.S.

He also plans to implement what his campaign described as “strong anti-inversion regulations and penalties,” though it did not detail those plans. He will also “deny all deductions and expensing writeoffs for moving jobs or production overseas” for jobs that could “plausibly” be done by American workers.

The surcharge is an attempt to “prevent firms from tax rate shopping,” said Carl Tannenbaum, chief economist at Northern Trust (NASDAQ:NTRS) and a former official at the Chicago Federal Reserve. “He’s trying to close the doors to multinationals that are flexible enough to move operations to other jurisdictions.”

Tannenbaum points out that these changes would require congressional action and its success would depend on Democrats winning a filibuster proof majority in the Senate in November.

Biden is also proposing a 10% “Made in America” tax credit for companies that create jobs for American workers and accelerate the U.S. economic recovery. It will be available for revitalizing closed or nearly closed facilities, retooling or expanding facilities, and bringing production or service jobs back to the U.S. and creating U.S. jobs. It will also apply when a company is increasing manufacturing wages above the pre-Covid baseline for jobs paying up to $100,000.

The Trump campaign has also proposed a “Made in America” tax credit in addition to tax credits for companies that bring back jobs from China, but he has provided no details on how that would work. Trump’s 2017 tax law included a tax deduction for corporations that manufacture in the U.S. and sell overseas, but the incentive has largely failed to spur new domestic production.

Biden’s plan would also end what his campaign describes as three “Trump offshoring loopholes” that were part of the 2017 tax law: allowing U.S. companies that locate production or call centers overseas to pay no taxes on the first 10% of profit, permitting companies to combine strategies to move profits overseas and park profits in tax havens to avoid paying all U.S. taxes, and applying taxes at just half the rate a U.S. company would pay for activities in the U.S.

Biden would double the Trump tax rate to a minimum tax of 21% on all foreign earnings of U.S. companies overseas. He would also end the use of tax haven strategies by applying the minimum tax to each foreign country separately.

Biden’s executive actions would use The Defense Production Act and the Federal Property and Administrative Services Act of 1949 to enforce Buy American rules. Among other measures, he would also crack down on companies that label products as Made in America if they’re coming from China or elsewhere and create a Made in America office within the White House Office of Management and Budget to ensure that the government complies with Buy American rules.

Trump is holding an airport rally in Saginaw, Michigan on Thursday. Michigan is a must-win state for both candidates, after Trump won the state by 11,000 votes over Hillary Clinton in 2016.

Michigan’s unemployment rate was 8.7% in July, down more than 6 percentage points from the previous month, as it economy begins to reopen after strict virus lockdowns.

(Adds economist comment in 11th and 12th paragraphs.)

©2020 Bloomberg L.P.

Biden Plan Sets Tax Penalties for Companies’ Offshore Profits
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (8)
Gordon Steward
niagara Sep 11, 2020 5:14PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
The Trump Administration  has created the largest fiscal deficits in history, IE; 1 trillion plus  prior to COVID 19  They inherited an economy that was holding inflation low ,improving employment and lowering deficits. Last year of Obama was  under 500 billion. There was no need for the Corporate giveaway. Trump brought the worst of Wall St. and set them up to create a credit induced economy  that had no thought of the future. Deregulation of Wall St. and  the EPA is counter productive to 90% of Americans .Interest rates are at zero  and they have set the USD up to depreciate to the point of definitive failure. The greatest economy of the world  created  by credit and consumption was on its knees after 2 weeks of COVID 19. Trump created  the worst case of economic instability  this country has ever had and its long from over. If you like to believe Trump is a genius ,a miracle worker ,a tough broad minded man ,then you have a serious problem with reality.
Mike Brarey
Mike Brarey Sep 11, 2020 2:10AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
no matter who wins, US is *****globalization
Mike Brarey
Mike Brarey Sep 11, 2020 2:09AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
mercantilism all over again
tony fu
tony fu Sep 10, 2020 9:43PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
holy......insane,
tony fu
tony fu Sep 10, 2020 9:43PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
holy......insane,
Angelia Polsinelli
Hllywd12 Sep 10, 2020 8:01PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I dont believe it.... period!
Ryan Turla
Ryan Turla Sep 10, 2020 5:22PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I need to see his stance on who he really is , a capitalist or a socialist. And the bad part about trump , his a divider but I like him as a capitalist.
Tre Hsi
Tre Hsi Sep 10, 2020 5:22PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
between the trade wars and tariffs, government interventions and bailouts, huge bugdet deficits, can you really say Trump is a capitalist?
David Zack
David Zack Sep 10, 2020 4:15PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
we will not vote for you. Biden Anti_ market
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email