Thursday, January 3, 2013
Happy New Year Wall Street!
The deal that President Obama signed into law January 3, 2013, will allow multinationals to defer paying US taxes on certain financial transactions undertaken outside the US. The companies, including Bank of America, Bank of New York Mellon, Citigroup, General Electric and JPMorgan Chase, are taxed by the US on that income only when it is brought back to the country. This will cost the US Treasury $9.4 billion in lost revenue in 2013 alone.
As Citizens for Tax Justice (CTJ) explained, “The active financing exception makes it easier for multinationals to expand overseas, making investments and creating jobs in foreign countries (rather than here in the US) by reducing the related tax costs.” CTJ added, “The active financing exception also plays a significant role in the ability of large U.S.-based financial institutions to pay low effective rates.”
Meanwhile, as Pat Garofalo points out, the fiscal cliff deal allowed a cut in the payroll tax to expire, raising taxes on every working American. The deal will reduce U.S. economic growth by about 1.3 percent this year.