Another week, another assault on business-as-usual by President Obama. Or is it, as some critics are starting to wonder, an assault on business, as usual?
This time, Obama took aim at offshore tax havens, announcing a drive against corporations and wealthy Americans who avoid U.S. taxes by putting their money overseas. He is seeking new tax laws, more-stringent reporting requirements, and the hiring of 800 new agents for the Internal Revenue Service to limit the practice of sheltering money and shifting jobs outside the United States.
"I want to see our companies remain the most competitive in the world," Obama said Monday, "but the way to make sure that happens is not to reward our companies for moving jobs off our shores or transferring profits to overseas tax havens." Obama said his proposal would bring in $210 billion in extra tax revenue over 10 years.
But all this prompted angry opposition from major business groups such as the U.S. Chamber of Commerce and the Business Roundtable. Corporate leaders said the Obama plan would result in their companies paying higher taxes than their foreign competitors, hindering their attempts to compete globally. The critics also argued that American jobs would be jeopardized if Obama succeeded in blocking corporations from deferring tax payments on overseas profits and taking a credit on taxes incurred in foreign countries to reduce their tax burden in the United States. John Castellani, president of the Business Roundtable, which represents some the nation's largest companies, issued a statement calling it "the wrong proposal at the wrong time for the wrong reason." Castellani said it will "make us less competitive in the international marketplace, where, by last count, 95 percent of the world lives."
Republicans in Congress seemed generally opposed to Obama's plan. "I cannot endorse a plan that gives preferential treatment to foreign companies at the expense of U.S. companies," says Mitch McConnell of Kentucky, the GOP leader in the Senate. Even some Democrats, including Max Baucus of Montana, chairman of the Senate Finance Committee, weren't wild about the changes. Calling for "further study," Baucus issued a statement noting, "I want to make certain that our tax policies are fair and support the global competitiveness of U.S. businesses." Much of the plan would require congressional approval.
Until the offshore decision, business leaders had been muted in criticizing the Obama administration, even though the new president has made them very uncomfortable by intervening more aggressively in the private sector than any other president in many years. Among his actions have been bailing out the financial industry, taking over a stake in the auto industry, and helping people avoid foreclosure in the housing industry, all with powerful strings attached.
Democratic strategists say that, up until now, business leaders haven't wanted to alienate the popular president so early in his tenure. One particular concern, says a senior Democrat who is close to the White House, was that corporate leaders did not want to be excluded from discussions of important legislation, especially proposals to overhaul the healthcare system. The offshore decision, however, has set up a clash that may break the informal truce.
White House officials aren't worried. "The last election in some ways was a referendum on President Obama's economic philosophy versus the philosophy that didn't do very well over the last eight years," argues an Obama adviser. Not that the administration is looking to pick fights. Commerce Secretary Gary Locke says, "President Obama has a very good relationship with the business community. He's working extra hard on creating more jobs and stabilizing the financial crisis.... In many ways, he's perhaps surprised the business community with just how moderate he has been and how much he is willing to work with them."
Since taking office, Obama has argued that his aggressive interventions in the economy not only were supported by the public but were forced on him by the financial crisis. "I don't want to run auto companies. I don't want to run banks. I've got two wars I've got to run already," he told a news conference April 29. "I've got more than enough to do. So the sooner we can get out of that business, the better off we're going to be." He added: "I'm always amused when I hear these, you know, criticisms of 'Oh, you know, Obama wants to grow government.' No, I would love a nice, lean portfolio to deal with, but that's not the hand that's been dealt us." By all indications, he will feel obliged to play that hand indefinitely.