WASHINGTON — Microsoft chief executive Steven Ballmer said the world’s largest software company would move some employees offshore if Congress enacts President Barack Obama’s plans to impose higher taxes on U.S. companies’ foreign profits.
“It makes U.S. jobs more expensive,” Ballmer said. “We’re better off taking lots of people and moving them out of the U.S. as opposed to keeping them inside the U.S.”
Obama on May 4 proposed outlawing or restricting about $190 billion in tax breaks for offshore companies over the next decade. Such business groups as the National Foreign Trade Council, the U.S. Chamber of Commerce and the Business Roundtable have denounced the proposed overhaul.
U.S. tax rules let companies defer paying corporate rates as high as 35 percent on most types of foreign profits as long as that money remains invested overseas. Obama says he wants to end such incentives to keep foreign profits tax-deferred so that companies would invest them in the U.S.
Microsoft reported an overall effective tax rate of 26 percent for 2008 in its last annual report.
“Our effective tax rates are less than the statutory tax rate due to foreign earnings taxed at lower rates,” the report said.
Barry Bosworth, an economist in Washington at the Brookings Institution research center, said many software companies such as Microsoft have exploited tax and trade rules in the U.S. and other countries to achieve a low overall tax rate.
Ballmer said that while the Obama proposals would preserve expense deductions related to research and experimentation costs, the overall deduction limits for companies that defer tax on foreign profits would raise the cost of employing U.S. workers. He estimated that higher taxes would reduce profits for companies that compose the Dow Jones industrial average by between 10 and 15 percentage points.
“It’s just a question of how much will the Dow come down,” Ballmer said. “It’s not about companies anyway; we’re talking about shareholders.”
