The provision below, which allows businesses to bring overseas profits back to America for jobs and investment, is one of the elements included in the House Republicans’ Plan for America’s Job Creators.
Left-Leaning Group Says Tax Holiday Would Raise $9 Billion In Revenue
August 25, 2011
A left-leaning think tank is pushing back on a congressional analysis that says a corporate tax holiday would be a long-term loser for the U.S. Treasury.
The Joint Committee on Taxation, in a report released in May, said that a plan that would allow multinationals to temporarily bring offshore profits to the U.S. at a much lower tax rate would lose close to $80 billion over a decade.
But a report to be released by NDN – and co-authored by Robert Shapiro, a Clinton administration official – questions JCT’s assumptions about how corporations would act in the aftermath of a holiday.
Instead, the think tank says, a so-called repatriation holiday would create close to $9 billion in new revenue over a decade.
“We find that the JCT’s approach has been flawed conceptually and its estimates of significant revenue losses are incorrect,” the report says.
Congressional opponents of a new holiday have latched on to the JCT analysis, which was requested by Rep. Lloyd Doggett (D-Texas), as they make the argument that a previous holiday failed to spark job creation in the U.S.
That holiday, enacted in 2004, allowed multinationals to temporarily repatriate offshore profits at a 5.25 percent rate, instead of the top corporate rate of 35 percent. Critics say corporations used the holiday more to buy back stock or buy dividends than to stimulate the economy.
The Obama administration has also said it is unwilling to look at repatriation outside of the broader discussion over corporate tax reform. A corporate tax overhaul has been a priority for the White House, but was placed on the backburner due to the debate over the debt ceiling.
The NDN study takes two basic disagreements with the JCT analysis. For one, the think tank signaled that it does not believe that corporations would rush to bring profits back during a holiday that would have eventually been repatriated at the regular tax rate.
And NDN is skeptical that multinationals would start keeping increased amounts of profits offshore after a repatriation holiday, to prepare for future ones — another criticism often lobbed at the idea.
Corporate heavyweights like Apple, Google and Cisco are pushing hard for another go-round at a tax holiday, and the idea also has bipartisan support on Capitol Hill. (A House measure currently has roughly 25 co-sponsors.)
These proponents argue that, with the economy sputtering, a tax holiday is one of the few realistic ways to inject new money into the U.S. economy.