WASHINGTON — President Obama's plan to crack down on what he called abuse of overseas tax loopholes was met Monday with quick and unusually sharp opposition from big business, threatening to produce the administration's first major confrontation with a broad segment of corporate America.
The fiercely negative reaction to the plan, much of which requires congressional approval, contrasted strongly with the business community's muted criticism, at most, of the president's sweeping government intervention in the banking and automobile industries.
The U.S. Chamber of Commerce said one of the proposed tax changes would hurt the U.S. economy by damaging the competitiveness of U.S.-based multinational companies.
"The U.S. multinationals employ millions of American workers," said Martin Regalia, chief economist at the business lobbying group. "If you make the parent companies less profitable, you're not going to create more jobs."
Because the recession has made members of Congress sensitive about adding to anyone's tax burden, Obama may have a tough time getting his plan through Congress.
"Both Republicans and Democrats in Congress will be listening to business very closely," said Dean Zerbe, a former senior tax counsel for the Senate Finance Committee, which along with the House Ways and Means Committee deals with tax legislation. "The administration will really have to make a strong case why we're taking steps like this."
The proposed crackdown consists of two main proposals. The first targets wealthy people who use foreign tax havens such as the Cayman Islands to hide resources from the Internal Revenue Service.
The second proposal would change the way multinational corporations are able to deduct expenses incurred in foreign countries to reduce or avoid U.S. taxes -- a practice Obama said encourages the shifting of jobs overseas.
The president described the issue as one of simple fairness.
The goal, he said, is to end a "tax scam" by shutting down overseas tax havens that let U.S. multinational corporations and some individual taxpayers avoid paying U.S. taxes while ordinary Americans take up the slack.
"Nobody likes paying taxes, particularly in times of economic stress," Obama said. "And yet, even as most American citizens and businesses meet these responsibilities, there are others who are shirking theirs."
