Obama backs off on big business

In May, the president promised to end a tax break on American companies operating overseas. Uh, never mind

By Andrew Leonard

Published October 13, 2009 2:36PM (EDT)

Scour, if you will, today's Wall Street Journal opinion page to see if there is any mention of how one of the Journal's lead stories on Monday, "Business Fends Off Tax Hit," conclusively proves that Obama administration policies resemble nothing close to socialism. You will scour in vain. The silence is deafening.

Funny -- you'd think there would be more cheering. The Journal's Neil King Jr. and Elizabeth Williamson make a pretty definitive case that Obama has abandoned one of the planks of his campaign, his proposal to "end tax breaks for companies that ship jobs overseas."

Specifically, the Obama administration had hoped to raise $200 billion by ending the tax break that "allows American multinationals to defer paying taxes on revenues earned abroad until companies repatriate them." The WSJ article is a blow-by-blow description of how big business rallied its forces to oppose closing the tax-deferral loophole and, apparently, won the battle.

The news gives us yet another distressing benchmark with which to judge how the Obama administration is living up to its own rhetoric. As recently as May, Obama had thundered forth on this promise: From "Remarks by the President on International Tax Reform:

And yet, even as most American citizens and businesses meet these responsibilities, there are others who are shirking theirs. And many are aided and abetted by a broken tax system, written by well-connected lobbyists on behalf of well-heeled interests and individuals. It's a tax code full of corporate loopholes that makes it perfectly legal for companies to avoid paying their fair share. It's a tax code that makes it all too easy for a number -- a small number of individuals and companies to abuse overseas tax havens to avoid paying any taxes at all. And 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, New York.

The Journal reports that "the tone of his remarks surprised many chief executives, including some who had supported Mr. Obama during the election ... Honeywell Chief Executive David Cote, a Republican who supported Mr. Obama in the election, says he was taken aback by the president's rhetoric on the tax issue ..."

They should have been taken aback. It was a strong speech. I watched it at the time, and wrote about it immediately.

Politically speaking, it's hard to see this as anything but a win for the White House. When Obama talked about ending "tax scams" by companies who are "shirking their responsibilities" to America, it's impossible not to see that playing well with the majority of the population....

But the real question is how much meat will Obama put on these bones? Actually changing the tax code will require congressional approval. Which means it will also require a sustained fight against exactly the same "lobbyists and special interests" that Obama blamed for "slipping these distorted provisions into our tax code."

Well -- we've got the answer to that question now. The proposal to end the tax-deferral loophole has been "shelved." Score another victory for the well-connected lobbyists.

Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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