Robert Carroll of the Tax Foundation outlines the importance of tax deferral and low corporate tax rates for U.S. companies operating abroad to maintain competitiveness, as the provision of tax deferral is targeted for repeal by critics in Congress.
The Congress and Administration decided to postpone action on major changes in international tax rules until this year. While the preoccupation with health care reform was undoubtedly a major factor, the concern that the Administration's proposals might undermine the competitiveness of U.S. companies operating abroad was also reported to be a major consideration.
The main tax provision targeted for repeal by critics in the Administration and the Congress is what's called deferral, the ability of U.S. multinational corporations to defer tax liability on active foreign earnings until those earnings are repatriated to the United States. Both the Obama Administration and Chairman Rangel have proposed to limit deferral of U.S. tax on active foreign earnings.