Bank of America, Microsoft, Exxon May Face Obama Tax Increases

By Mark Drajem

Feb. 2 (Bloomberg) -- Bank of America Corp., Exxon Mobil Corp. and Microsoft Corp. would be among companies paying $400 billion in additional taxes under President Barack Obama’s $3.8 trillion budget.

Obama wants to impose a fee on 50 of the biggest financial companies, costing $90 billion to firms such as JPMorgan Chase & Co. and Bank of America. His budget also proposes ending tax breaks for oil companies led by Exxon, the largest U.S. company, and taxing overseas profits for companies such as Microsoft, the world’s largest software maker.

The tax increases undermine Obama’s goal of doubling exports and creating jobs, said John Castellani, president of the Business Roundtable, a Washington-based group representing the chief executive officers of companies such as Exxon and Microsoft.

“Now, more than ever, we simply cannot afford to gamble away economic recovery and job creation on risky tax increases,” Castellani said in a statement.

The budget, sent to Congress yesterday, is for the fiscal year that begins Oct. 1. It reflects the administration’s struggle to boost the economy and job growth while tightening the government’s belt to reduce deficits in the years ahead. It is subject to approval, and modification, by Congress.

Other companies may come out ahead. Fairfield, Connecticut- based General Electric Co., a maker of nuclear and renewable energy equipment, would benefit under spending proposals to boost development of energy-efficient technology. Insurer Amerigroup Corp. would gain from an extension of Medicaid funding to the states.

Tax Credits

Aside from the levy on banks, which was first proposed last month, Obama offered scaled-back versions yesterday of tax increases he advanced in his first budget plan a year ago.

“Compared to last year, this was surprisingly tame,” Andrew Parmentier, managing partner of the Washington-based research firm Height Analytics, said in a report to clients. “The market was largely uninterested.”

The budget calls for the elimination of $36.5 billion over the next decade in tax credits for oil and gas companies such as Exxon, Chevron Corp. and ConocoPhillips. The administration dropped other proposals from last year, easing the impact on energy producers, said Kevin Book of Washington-based managing director for analysis firm Clearview Energy Partners LLC.

After complaints from Microsoft of Redmond, Washington, and Peoria, Illinois-based Caterpillar Inc., the administration also scaled back a proposed tax increase on overseas income. It would yield $122.2 billion in revenue, not the $210 billion estimated a year ago. Congress didn’t enact the proposal last year.

Microsoft, Pfizer, Caterpillar

Representatives for Microsoft, drugmaker Pfizer Inc. and Caterpillar, the world’s largest maker of bulldozers, have said the tax increase would undermine their competitiveness with overseas rivals, and could lead them to set up operations offshore instead of in the U.S.

“It makes U.S. jobs more expensive,” Microsoft CEO Steven Ballmer said in an interview in June.

Lockheed Martin Corp. could benefit from increased defense spending, and Boeing Co. from a $2 billion weather satellite system.

A program of loan guarantees for nuclear-power makers and renewable energy could assist manufacturers such as GE. The world’s biggest maker of freight locomotives could also win from an increase in spending for high-speed rail.

Energy Department

The Energy Department proposed $48 billion in loan guarantees to finance projects aimed at cutting U.S. emissions of greenhouse gases tied to global warming, including help for nuclear-power plant developers, such as Atlanta-based Southern Co.

Automakers would get $11.4 billion in loans for “clean” technology, a 115 percent increase over Obama’s 2010 plan. Ford Motor Co., Tesla Motors Inc. and Nissan Motor Co. all have received aid under that program.

Obama’s spending plan would also extend emergency funding the federal government provided for Medicaid, the government’s health program for the poor, in last year’s U.S. stimulus package. Those programs are administered in some states by Minnetonka, Minnesota-based UnitedHealth Group Inc. and Virginia Beach, Virginia-based Amerigroup.

Companies including White Plains, New York-based ITT Corp. would benefit from the Federal Aviation Administration’s plan to boost spending for so-called NextGen equipment overhauls by almost a third, to $1.1 billion. ITT won a contract in 2007 to build and maintain ground stations that enable the FAA to use satellites to guide planes.

Not an Edict

All of these proposals must now run the gauntlet in Congress, which didn’t take up many of the tax increases Obama proposed last year.

“Investors should not mistake this (or any other) budget request for an edict,” Book said. “Congress still controls final spending decisions, and election years can widen ideological differences between a thrifty White House and lawmakers hoping to win reelection.”

To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net.