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The Obama International Tax Plan: A Major Step Forward


Reuven S. Avi-Yonah


University of Michigan Law School

May 7, 2009

U of Michigan Law & Economics, Olin Working Paper No. 09-007
U of Michigan Public Law Working Paper No. 149

Abstract:     
On May 4, 2009, President Obama in person introduced a set of proposals to reform U.S. international taxation that are the most significant advance toward preserving the income tax on cross-border transactions since the enactment of Subpart F by the Kennedy Administration in 1962. In essence, the Obama proposals (the “Obama Plan”) introduce a 21st Century version of the vision begun by Thomas Adams in 1918 and continued by Stanley Surrey in 1961: A world in which source and residence taxation are coordinated so as to achieve the underlying goals of the international tax regime. As I have explained at length elsewhere, these goals are the Single Tax Principle (all income from cross-border transactions should be subject to tax once, not more and not less) and the Benefits Principle (active income should be taxed primarily at source, passive income primarily at residence). The Obama Plan does this by addressing the central problem of implementing corporate and individual income taxation in a world of open economies: Effective source taxation requires residence taxation, and effective residence taxation requires source taxation.

In what follows, I will comment on the major proposals in the Obama Plan and explain how they form a coherent step forward toward achieving the Single Tax and Benefit Principles. I will first address the proposals related to the taxation of active income earned by corporations, and then the proposals related to the taxation of passive income earned by individuals.

Number of Pages in PDF File: 8

Keywords: International tax

JEL Classification: H25

working papers series


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Date posted: May 7, 2009 ; Last revised: May 10, 2009

Suggested Citation

Avi-Yonah, Reuven S., The Obama International Tax Plan: A Major Step Forward (May 7, 2009). U of Michigan Law & Economics, Olin Working Paper No. 09-007; U of Michigan Public Law Working Paper No. 149. Available at SSRN: http://ssrn.com/abstract=1400624 or http://dx.doi.org/10.2139/ssrn.1400624

Contact Information

Reuven S. Avi-Yonah (Contact Author)
University of Michigan Law School ( email )
625 South State Street
Ann Arbor, MI 48109-1215
United States
734-647-4033 (Phone)
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