Foreign Profits Threaten Tax Deal

Business groups want to eliminate most taxes on overseas profits.

President Barack Obama’s belief that the U.S. tax system pushes jobs overseas and Republican assertions that multinational companies are disadvantaged will make compromise on a new corporate tax code difficult.

Even as business groups and Republican lawmakers praised the administration’s call yesterday for a lower corporate tax rate, they insisted that ending most taxes on foreign profits is an essential part of what ought be a larger overhaul of the tax code.

The divide on international taxation is one of many issues that would need to be bridged as part of a tax code rewrite. The administration and Republicans also disagree on the total amount of revenue that should be raised; on how to treat business owners who pay taxes through the individual tax code; and on which tax breaks to retain in a new system.

The administration’s framework called for dropping the business tax rate to 28 percent and removing tax breaks to help offset the revenue loss. Obama would retain tax breaks for corporate research, domestic manufacturing and renewable energy.

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