* Savings from closing loopholes: $122 bln over a decade
* Original plan had savings of $210 bln over a decade
* 'Check the box' proposal gone from blueprint
* Again proposes tax hike on carried interest, dividends
(Adds further details, paragraphs 14-15, 18-19, edits
By Kim Dixon
WASHINGTON, Feb 1 President Barack Obama has
scaled back his ambitious plan to close loopholes global
companies use when accounting for taxes on profit earned
overseas, according to his 2011 budget blueprint released on
Obama, who has criticized corporations that keep profits
overseas to avoid U.S. tax, proposed changes he said would
raise $122 billion over a decade, down from loophole-closers
that last year he said would raise $210 billion over 10 years.
He had mentioned the issue in his State of the Union
address last week. "To encourage these (energy and
manufacturing companies) and other businesses to stay within
our borders, it's time to finally slash the tax breaks for
companies that ship our jobs overseas and give those tax breaks
to companies that create jobs in the United States of
His plan last year drew a lukewarm response from Congress,
even from his fellow Democrats, many of whom said the changes
should be part of a broader overhaul of the tax code.
For a second year, the international tax aspects of his
budget met with tepid enthusiasm from tax-writing committee
leaders in Congress.
Senate Finance Committee Chairman Max Baucus praised some
points in Obama's budget but poured cold water on his
immediate international tax ambitions.
"These policies are better addressed in the context of
overall tax reform," he said in a statement.
A senior administration official seemed frustrated by
congressional reaction, saying there was going to be a
"reckoning" when policymakers would have to make tough
decisions about raising money to bring down the deficit.
"This president has been willing to put tough choices on
the table," said the official, who spoke during a background
briefing with reporters.
The administration has sought to revise a policy that lets
U.S.-based multinational companies defer U.S. tax on income
earned abroad by stopping them from deducting most expenses
associated with that income until it is recognized in the
In his 2011 budget, Obama proposed to raise just $26
billion over a decade, by limiting deductions for interest
RESPONDING TO INDUSTRY
Noticeably absent from the president's latest budget
proposal is a plan to revise rules that give companies power to
"check a box" to avoid taxes when classifying foreign
subsidiaries. Last year he said this would raise $87 billion
over a decade.
Another senior administration official, speaking to
reporters in a background briefing, said that after
"engagement" with the business community, they decided to focus
their efforts elsewhere.
Instead, the President wants to clamp down on so-called
transfer pricing, where companies park intangible assets like
copyrights or patents overseas to avoid higher U.S. taxes.
Under the plan, the administration would regard as
suspicious a company paying an effective tax rate of less than
10 percent with a rate of return of more than 30 percent,
according to administration officials.
Companies and some economists argued Obama's earlier
proposal could encourage industry to keep profit -- and jobs --
"I think they are trying to be responsive to the
concerns of some last year that they were going to encourage
people to ship more jobs overseas," said Anne Mathias, an
analyst with Concept Capital in Washington, which advises
All told, Obama proposes to raise about $2 trillion in new
taxes from the rich and corporations over a decade, including
new funds for health care, ending tax breaks for oil and gas
companies and the imposition of new "financial crisis
responsibility fee" on financial institutions to raise about
$90 billion over a decade. [ID:nN01191432] [ID:nN01190574]
CARRIED INTEREST, DIVIDENDS
From the wealthy, the budget seeks to raise nearly $1
trillion over a decade by letting tax cuts for individuals
making more than $200,000 expire, among other changes.
In other areas of interest to Wall Street, Obama once again
proposed taxing carried interest earned by hedge fund and
private equity fund managers as ordinary income, which would
boost the tax rate from 15 percent to typically the highest
The change could raise $24 billion over a decade, according
to the Administration.
The proposal passed in the House of Representatives but has
hit a roadblock in the Senate.
The president again proposed raising taxes on dividends and
long term capital gains for joint filers earning more than
$250,000, from 15 percent to 20 percent. Such a move could
raise $105 billion over a decade.
This issue will be taken up when Congress starts work on
the individual tax cuts for all income groups enacted by former
president George W. Bush, which expire at the end of this
For more stories on the Obama budget proposal click on
(Reporting by Kim Dixon; editing by Lisa Von Ahn, Bernard Orr
and Tim Dobbyn)