The US President’s proposal to remove the tax inducement to American companies that move jobs abroad was welcomed very well by most Americans who already had little sympathy for those who choose places like Cayman Islands just to save themselves from paying higher taxes. Although the decision may seem a fair one, many companies can suffer because of it and it can hurt outsourcing of jobs to countries like India.
Obama’s opinion is that there should be no difference between creating a job in a big city like New York or one in, let’s say, Bangalore, India. This move is Barack Obama’s first major step in what seems to be a complete rehabilitation of the U.S. tax system.
Being as it is, not everyone agrees with the president’s proposal.
Daniel Griswold, an expert at the Cato Institute, believes that locating affiliates in foreign countries is right now the most important way for American companies to reach out to new customers and markets. He affirms that this so called restoring of the tax system will only do harm and will not allow U.S. companies to expand to global markets, risking the U.S.-based jobs that support their foreign affiliates.
This demand for more profits to stop the increasing budget deficit and pay for government programs might just be the biggest reconstruction of the U.S. tax code since 1986.Obama’s promise to cut the deficit in half in four years with his new economic plan is starting to concern many lawmakers who consider the burden of a long-term debt a little too hard to carry. The U.S. budget deficit is likely to be reduced from $1.8 trillion this year to $1.4 trillion in 2010. The President proposed a record $3.55 trillion budget for 2010, including the reconstruction and modernization of the healthcare and education system and expanding green technologies.
In the months ahead there are more changes likely to be proposed. In March Obama formed a team to come up with ways to simplify the tax code, close loopholes and limit tax evasion. Obama’s vow to increase the taxes for Americans with incomes that top $250.000 a year seemed like a very good start but there still are Democrats who still believe this may just not be enough.
The quest for a simpler tax system continues and The Center for the Study of the Presidency released a report in March talking about the need to rebuild a tax code that has 3.7 million words. One of its conclusions was that the tax system needs to reach a certain balance between taxing income and consumption.
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