Well, after successfully ruining the mortgage banking and automobile industries, the Big BO seems intent on wrecking havoc on international companies based in the U.S. By the time this nimrod is through, we’ll all be sitting around like the people in New Orleans after Katrina hit. Stunned, bruised, and not a penny to our names; we’ll be waiting for the government rescue boats to carry our sorry butts to shore.
While additional taxes are rarely popular, Obama’s decision to go after corporate earnings outside the United States is a particularly prickly subject for technology executives because the industry has been steadily boosting its overseas sales amid rising demand for its gadgetry and services.
If Obama’s proposal becomes law, the hard-hit companies would include tech bellwethers like Hewlett-Packard Co., IBM Corp., Cisco Systems Inc., Microsoft Corp. and Google Inc. Each of those companies realized a benefit of more than $1 billion from lower foreign tax rates in their most recent fiscal years — an advantage that could lost if Obama is able to change the rules.
“It would be like an earthquake for high tech,” said Carl Guardino, chief executive of Silicon Valley Leadership Group, an industry trade association. “On a Richter scale of 1 to 10, this would be a 12.”
Collectively, HP, IBM, Cisco, Microsoft and Google lowered their tax bills by a combined $7.4 billion in their last fiscal years by taking advantage of lower tax rates outside the United States, according to an analysis by The Associated Press.
Through the years, these five tax companies have avoided U.S. income taxes and foreign withholding taxes on a combined $72 billion in undistributed earnings from their foreign operations.
While Obama’s proposal might not tax all the money U.S. companies keep overseas, it apparently would target a big chunk. Obama estimated his plan would raise a total of $210 billion, or an average of about $21 billion annually, over a 10-year period.
By reinvesting their earnings overseas, U.S. companies insulate themselves from much higher tax rates had the money been made in their home country.
Google, for instance, would have been hit with an effective tax rate of 45.2 percent instead of 27.8 percent last year if it hadn’t been able to capitalize on lower rates overseas, according to the Mountain View-based company’s annual report. Without the lower foreign rates, Google’s 2008 tax bill would have been $1.02 billion higher. Google’s income before taxes totaled $5.85 billion last year.