International tax gives me a migraine, but President Obama’s new effort to tax overseas income has the wonkosphere buzzing, so I can’t resist adding to the cacophony.
First, some of what Obama is proposing will be very useful. Some may be counterproductive. But whatever it is, it is not tax reform. I wish Obama would stop degrading the concept of reform by using the phrase to describe what is mostly a tax increase on multinational businesses. Tax reform implies a coherent structure for raising revenue. This is a complex package of international tax changes, but I don't see the all-important internal logic that makes it reform.

President Obama’s new international tax proposals promise to “replace tax advantages of creating jobs overseas with incentives to create them at home”. The main offender is the so-called deferral provision. Under current law, U.S. corporations pay tax on their worldwide profits, but can defer tax on profits earned by their overseas subsidiaries until they “repatriate” the profits as dividends to the U.S. parent corporation. If the foreign subsidiary is located in a country with a corporate tax rate lower than the U.S. corporate tax rate, deferral makes the effective tax rate companies pay lower on foreign investments than here — an incentive for U.S. corporations to invest in low-tax foreign countries instead of in high-tax foreign countries or at home. (Some of our major trading partners also allow their companies to defer tax on foreign profits, while many exempt most foreign-source income from tax entirely.)