Doing away with taxes on the foreign profits of U.S. companies is expected to be recommended by a presidential advisory group, reported the Financial Times.
The panel — appointed in January by President Bush to propose changes in the U.S. tax system — is expected to issue its final report to the Department of the Treasury next month, the FT added.
Abolishing the taxes, the argument goes, would make U.S. companies
more competitive worldwide and simplify their tax calculations, too. Many domestic companies have traditionally sheltered billions of dollars in earnings abroad so they aren’t taxed at a (usually higher) U.S. rate. So far this year, after Congress temporarily lowered the effective tax rate from 35 percent to 5.25 percent as part of the American Jobs Creation Act, $225 billion in foreign profits have been repatriated by U.S., according to
The advisory panel is also expected to propose dramatic changes for personal income taxes that will likely have only an indirect effect on companies and municipalities. Proposals reportedly include reducing or eliminating deductions of state and local income taxes, mortgage interest, and health-care costs; eliminating the tax on dividends and the alternative minimum tax; and making some cuts to corporate and personal income taxes.
Many experts, however, believe that such changes to the home-mortgage deduction would lead to a widespread decline in real-estate prices, according to the FT. And Sen. Charles Schumer (D-NY) reportedly said that eliminating the state and local income-tax deduction would be “a dagger to the heart of the people of New York.”