Obama says “close tax loopholes” to bring in more money, but the amount is small compared to the multi-trillion dollar budget – so the real purpose is

to flex government muscles

Newspapers are full of Obama’s “crackdown” on so-called tax loopholes; but is Obama trying to bring more money into government coffers or is he just asserting the power of government against those who have won “life’s lottery” and “spreading the wealth?”

Obama has announced that his tax plan would eliminate some tax deductions for companies that earn profits in countries with low tax rates and change the burden of proof when taxpayers are accused of violating tax laws. Obama wants the courts to consider U.S. citizens who use tax havens such as the Bahamas or Cayman Islands to be guilty of violating U.S. tax laws. So in tax cases, the tax payer will be presumed guilty unless he can prove he is innocent. I don’t know about you but I think this turns everything around in our system of criminal jurisprudence where the accused has been presumed innocent until proven guilty. If Obama gets his way, what will be next for those accused of some other crime, will they have to prove their innocence like some other countries require?

Of course Obama says these changes are necessary to increase the amount of tax money collected, but in reality it is estimated that these changes would produce $210 billion over the next decade. Does that seem like a lot of money for the government when Obama’s budget includes spending over 3.5 trillion dollars in one year alone?

In exchange for these tax law changes, Obama said he was willing to make a research tax credit that was to expire at the end of the year permanent. Wow, what a trade-off, particularly since officials estimate that making the tax credits permanent would “cost” taxpayers considerably less than the 2010 Obama budget.

Companies that shelter profits over seas will lose billions if Obama's plan becomes law. Current regulations require companies to pay taxes only if they bring the profits back to the U.S. If they keep the profits offshore, they can defer paying taxes indefinitely -- and many do. A few years ago Bush let companies bring back over seas profits without penalty and government revenue went up significantly.

Obama’s folks say the changes are a way to close unfair tax loopholes that encourage companies to send jobs overseas and to encourage companies to keep jobs in the United States. They also say the changes would close a Clinton-era provision that would cost $87 billion over the next decade by letting U.S. companies treat international subsidiaries as branch offices as a legal way to avoid paying billions in taxes on international operations. However this is still a long way from the trillions Obama wants to spend in the coming budget and in the foreseeable future.

But the real show of Obama power is in his plan to ask Congress to crack down on tax havens and implement a major change in the way courts view guilt. Under Obama's proposal, Americans would have to prove they were not breaking U.S. tax laws by sending money to banks that don't cooperate with tax officials. It essentially would reverse the traditional presumption of innocence in U.S. criminal courts.

With a new intrusive government program introduced by Obama seemingly every week, one can only wonder what tinkering with constitutional rights will be next.