Obama said his plan would raise $210 billion over the next 10 years, though no tax increases would go into effect until 2011.
Lost revenue isn't the only problem, Obama said, contending that the current system gives companies an incentive to invest overseas rather than creating jobs at home. "It's a tax code that says you should pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, N.Y.," Obama said.
The business community, however, argues that the deferral system helps them compete against foreign companies that pay taxes only in the countries where they generate profits. A coalition of business groups has already stepped up lobbying efforts to kill attempts to increase taxes on overseas profits, saying it would make American companies less competitive.
"We're talking about American jobs at American companies and their ability to compete overseas," said John J. Castellani, president of the Business Roundtable.
Obama's plan would impose billions of dollars in new taxes on many of the nation's largest corporations, including Google, General Electric, Hewlett-Packard, Intel, and Johnson & Johnson, tax specialists said. In exchange for the increased taxes some companies would have to pay, Obama agreed to make permanent a research tax credit that would provide firms about $75 billion in breaks over the next 10 years but is currently set to expire at the end of the year.
Obama has widespread support in Congress to crack down on tax evaders who illegally hide assets in tax havens. But he faces stiff opposition, even within his own party, to increasing taxes on the legal transactions of US multinational companies. Senator Chuck Grassley of Iowa, the top Republican on the Senate Finance Committee, said: "If he's using tax shelters as a stalking horse to raise taxes on corporations at the cost of US jobs, he'll lose me."
While the United States has a top corporate income tax rate of 35 percent, which is among the highest in the developed world, most corporate income is taxed at much lower rates because of deductions and credits.
In 2004, large corporations paid an average effective tax rate of 25.2 percent on domestic income, according to a Government Accountability Office report last year. For foreign income, the effective US tax rate was about 4 percent, the report said. That figure does not include taxes paid to foreign countries.
