What now for the wealthy in Obama's America?
06/11/2008
President elect Barack Hussain Obama sweeping victory in the 44th Presidential election was partly as a consequence of promising to cut tax for middle-income America and "spreading the wealth" by increasing tax on the wealthy in order to subsidise tax cuts for low- and middle-income America. He also promised to punish those anti patriotic corporations "shipping jobs overseas", exploiting offshore financial centres and generally manipulating the US tax code to avoid tax.
For corporations and wealthy executives, the main areas of attack involve reducing opportunities for international tax planning, including reforming deferral to end the incentive for companies to "ship jobs overseas"; close the offshore pension loophole; close domestic tax loopholes by clarifying the economic substance doctrine and increasing reporting of capital gains, among other measures; eliminate special tax breaks for oil and gas companies, including repealing special expensing rules, foreign tax credit benefits, and manufacturing deductions; tighten tax rules governing CEO pay, and reclassify carried interest as ordinary income.
The President elect has also outlined he intends to work with Congress to provide the Treasury and IRS the "tools they need to close down the use of international tax havens for improper tax avoidance or tax evasion."
However, Obama has pledged to reward those corporations which play by these proposed rules and retain investment and earnings in the United States with a cut in corporate tax, although the precise nature of this cut has not been quantified.
It is envisaged that the money saved though the closure of corporate tax loopholes will also be used to provide new incentives for small businesses and start-ups, including the elimination of capital gains tax. There would also be a permanent extension to the research and development tax credit, offer of a new refundable 50% health tax credit on employee premiums paid by employers, and funds available for schemes that promote renewable energy.
