6 April 2020

Small Exporters Wary of Obama Tax Plan

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The Obama Administration’s plan to tax the foreign earnings of American companies might hinder the ability of small exporters to compete abroad, several small firms said. On Monday, President Obama proposed to impose a 19% tax on foreign earnings by U.S. firms, along with a one-time 14% tax on previous earnings held overseas. Roughly 97% of the estimated 300,000 exporters in the U.S. are small businesses, with fewer than 500 employees, according to the U.S. Census Bureau. Many small exporters already have seen their profits hammered by a stronger dollar in recent months.

Lee Cohen, general manager of Setton Pistachio of Terra Bella, Inc., a Central California pistachio grower with fewer than 500 employees, said the new tax would put his company at a disadvantage against other global growers, such as those in Iran. The company grows about 100 million pounds of pistachios a year, and exports at least half much of that to markets in Europe.

President Obama has encouraged small-business owners throughout the economic recovery to explore foreign markets, in response to weaker demand from customers at home. PayPal Inc. recently launched a free online service to help small businesses identify sales opportunities abroad, including information on seasonal sales peaks, such as holidays and other events, as well as currency exchange rates, and customs procedures and taxes.

Exports of U.S. goods fell by $1.8 billion in November to $136.7 billion, while exports of services fell by $0.1 billion to $59.6 billion, according to the latest Commerce Department data. The Export Import Bank approved more than $20 billion in export financing for U.S. firms in 2014, including working capital guarantees and export credit insurance. That is down from $27 billion in 2013. About 90% of the bank’s 2014 transactions were with small firms.

Apart from taxing foreign earnings, the president budget included tax-relief measures for small businesses, including a permanent extension of expensing credits and the elimination of capital gains taxes on small business stock, among others.

The proposal to impose a 19% minimum tax on future foreign earnings goes in a different direction than Republicans have chosen so far, and even some liberals think it faces long odds.

Still, some Republican lawmakers have embraced the idea of a one-time tax on preexisting foreign earnings that are parked offshore as a way of closing the books on past profits. Others are wary of using a tax overhaul to raise revenues for any purpose, even infrastructure.

Click here to access the full article on The Wall street Journal. 

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