US business groups have criticized the Senate's approval of a bill which proposes to tighten international tax rules with the intention of curbing what Democrats consider as large scale corporate tax avoidance.
An amendment to a bill which aims to provide cash-strapped state governments with billions of dollars in additional aid to cover teachers' salaries and Medicaid bills, among other costs, would make several changes to the US foreign tax credit rules to prevent multinationals from over-claiming for tax refunds in the US in relation to income earned and already taxed abroad.
According to the Business Roundtable, the amendment, submitted by Washington state Democrat Patty Murray, would raise nearly USD10bn in new taxes on US companies with overseas business operations.
"Keeping American companies and workers competitive should be the number one goal of US tax policy," commented Johanna Schneider, Executive Director, External Relations of Business Roundtable. "However, [the] Senate vote only adds to the growing disparity between the tax policies of the United States and most other major world economies."
Schneider observed that companies in the US are already subject to the second-highest corporate income tax rate among developed countries. "Further raising these taxes will make America’s largest employers less competitive, which will undermine US economic growth and job creation," she said.
The Business Roundtable, the US Chamber of Commerce and the National Association of Manufacturers have been joined by several other US business associations in signing a letter to Congressmen which warns that the amendment would have the effect of "reducing the earnings US companies bring back from their foreign operations."
In something of an unusual step, the House of Representatives may return from its summer recess to vote on the state funding bill this week.
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