Patent Law

Feeling Taxed

By Gary Odom and Jordan Kuhn

The same companies that crusade to evade paying any "patent tax" to inventors are now crusading to evade corporate income tax. On Monday, President Obama outlined proposals for cracking down on overseas tax havens, and eliminating tax breaks for U.S. corporations that do business overseas. Computer tech companies soiled their diapers in protest. "This is a $60 billion hit on American employers that their foreign competitors won't feel," wailed the Silicon Valley Leadership Group, representing such esteemed companies as HP, Cisco, and Oracle. Duh.

Foreign companies pay U.S. taxes on business done in this country. Reciprocally, U.S. multinationals pay local taxes. Under current law, U.S. taxes are deferred until foreign-earned money is repatriated. This incentive fosters offshore tax havens while limiting capital inflow back to the U.S. President Obama seeks to rescind what he calls "corporate loopholes."

Obama, upon noting that U.S. multinationals paid $16 billion in taxes on $700 billion of foreign earnings in 2004:

The way we make our businesses competitive is not to reward American companies operating overseas with a roughly 2 percent tax rate on foreign profits, a rate that costs taxpayers tens of billions of dollars a year.

One of Obama's proposals is to extend the current tax credit for companies that perform research in the U.S., another corporate loophole set to expire this year. Individual inventors get no such tax credit for inventive research.

Full post as published by The Patent Prospector on May 05, 2009 (boomark / email).