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Corporate execs say tax holiday can’t wait
A group of corporate executives is stepping up its push for a corporate tax holiday, telling top Washington officials they risk tossing away hundreds of billions of dollars in possible domestic investment if they don’t act.
The 15 executives said that a holiday to temporarily reduce the tax rate on foreign profits brought to the U.S. would open the door to investment that would otherwise happen abroad.
“As you know, the U.S. tax code contains massive disincentives for American businesses to bring overseas earnings home — and as a result, more than $1.4 trillion is trapped overseas,” the executives wrote Wednesday to President Obama and the top Republican and Democrat in the House and Senate. “In light of our nation’s serious economic challenges, Congress should eliminate these disincentives and encourage this money to be deployed in the U.S. so that it can provide an immediate jolt to our economy.”
As it stands, legislation in both the House and the Senate would tax repatriated offshore funds at as little as 5.25 percent — or an 85 percent reduction from the top corporate rate of 35 percent.
The U.S. corporate tax rate is among the highest in the world, and American-based corporations owe that rate on profits made all across the globe. The companies do get credits for taxes paid to foreign governments.
The WIN America Campaign, a coalition including many corporate powerhouses, is lobbying hard for those repatriation proposals, and organized Wednesday’s letter, which was signed by executives from Cisco, Duke Energy, Microsoft and Oracle.
Those corporations have long said that a tax holiday could essentially serve as a bridge to a broader revamp of the corporate tax code, which they also support, and that their idea is one of the few ways to encourage domestic investment that has support on both sides of the aisle. Repatriation backers are also hoping the deficit-reducing supercommittee might take up their idea.
But the Obama administration and others in the corporate world, like IBM, have said they fear a tax holiday could distract from the broader reform push.
Congressional opponents of repatriation, like Sen. Carl Levin (D-Mich.), have also said that a previous tax holiday, enacted in 2004, did little to boost job creation and that repatriated funds were used more for stock buybacks.
Rep. Dave Camp (R-Mich.), the chairman of the House Ways and Means Committee, has unveiled a draft proposal that would permanently limit U.S. taxation of foreign profits.
Camp has said that, while he does not believe his plan works against the tax holiday push, he also wants a more permanent solution.
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