President Barack Obama on Monday announced a new proposal as part of his 2016 budget to tax the trillions in offshore profits made by U.S.-based multinational corporations, but critics say the plan leaves in place a system that “encourages companies to game the system to avoid U.S. taxes.”

The proposal would impose a 19 percent tax on the future overseas earnings of U.S.-based companies, as well as a one-time 14 percent tax on the trillions in offshore profits that those companies hold right now.  The Obama administration said revenues from the one-time tax will go toward fixing the country’s crumbling infrastructure and filling in a projected gap in the Highway Trust Fund—which has suffered chronic shortfalls as revenues from fuel taxes remain unchanged since 1993 while construction costs continue to rise.

“Obama’s decision to challenge international tax avoidance is laudable, but his execution leaves a lot to be desired.” —Robert McIntyre, Citizens for Tax Justice

“President Barack Obama’s decision to challenge international tax avoidance is laudable, but his execution leaves a lot to be desired,” said Robert McIntyre, director of Citizens for Tax Justice. “If companies were required to pay the same tax rate on their foreign profits as their domestic income, then they should owe 35 percent on their accumulated foreign profits, rather than the 14 percent that President Obama is proposing under his new transition tax.”

“Such a low tax rate would disproportionately benefit the worst corporate tax dodgers and leave billions in tax revenue on the table that could be used to make critical public investments,” McIntyre said.

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In addition, the New York Times reports, “The president will reiterate his call for a business income tax overhaul that lowers the corporate tax rate from 35 percent to 28 percent, and 25 percent for manufacturers.”

James Henry, senior adviser with the Tax Justice Network, stated on Monday, “The proposal is not as bad as what Bush did in 2004,” referring to a previous tax repatriation holiday, “but if you keep doing this, you in effect repeal the corporate income tax.”

In 2004, a number of U.S.-based corporations repatriated their overseas profits under an amnesty provision of the American Jobs Creation Act. However, as Citizens for Tax Justice pointed out (pdf) in 2009, Congress “utterly failed” to ensure that those profits were actually used for job creation or any economic stimulus.

“A recent study found that there was no positive correlation between a company’s repatriated earnings and an increase in the permitted uses, but did find a positive correlation between the repatriation and increased repurchases of stock (effectively putting the money in the hands of the shareholders) which was NOT a permitted use under the bill,” CTJ found.

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