Bill Thomas Proposes Tax Cut For Small Firms

by Mike Godfrey, Tax-News.com, Washington

28 July 2003

The top rate of tax for many firms in the United States will fall under a new proposal being put forward by House Way and Means Committee Chairman Bill Thomas that will replace the Extraterritorial Income Exclusion Act ruled illegal by the WTO.

Among the measures to be announced by the California Republican is a reduction in the higher rate of tax for small and mid-sized firms from 35% to 32% according to Congressional sources. Other proposals in the Thomas bill would reduce the tax on income repatriated to America from foreign subsidiaries for a limited period in addition to a temporary extension of the research and development tax credit. Thomas also wants to generally streamline and modernize the country's international taxation system.

The United States has been forced to repeal the existing legislation after the WTO gave the European Union permission to apply $4 billion in tariffs in retaliation for what it deems unfair competition from the Extra Territorial Income Exclusion Act, which effectively lowers tax by 15% on exporting firms' overseas income.

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