We can't allow Congress to take earned benefits programs away from seniors
Trump and GOP wise to keep tax reform and infrastructure separate
The White House is working on a bold plan to spur $1 trillion in investment in the nation's transportation, energy, water, broadband and civic infrastructure using a mix of federal funding and private financing.
One concerning idea floating around Capitol Hill in the meantime is using a one-time repatriation holiday on overseas earnings to pay for part of it. The misguided proposal would reduce the current tax rate on repatriated earnings, which is currently set at a sky-high 35 percent, and use the resulting revenues to finance infrastructure projects.
Tying infrastructure to tax reform using a repatriation holiday currently finds popularity among Democrats and moderate Republicans. Eying the $2 trillion in profits that American companies currently keeping overseas, many lawmakers see a piggy bank to offset federal spending desires.
Sen. Ron Wyden (D-Ore.) recently told the American Road and Transportation Builders Association that the proposal to pay for infrastructure with the revenues from repatriated of overseas corporate profits "has a pulse again." Rep. Richard Neal (D-Mass.) expressed support for the idea in a House Ways and Means hearing on tax reform in June.
Using funds from a one-time repatriation holiday to pay for domestic spending projects - infrastructure or otherwise - will fail to fix to address the underlying reason why American companies currently hold around $2 trillion in profits abroad. Companies will face the same disincentive to bring back overseas profits once the repatriation holiday is over.
The problem rests with the tax code. The U.S. currently assesses the second highest corporate tax rate in the developed world, and it is one of only two countries that taxes earnings abroad when companies bring them back home. Given this hostility to domestic investment, it's no wonder that so many companies choose to sit on their cash or invest it abroad. It's these policies that caused more than a dozen companies to undertake a process known as inversion and renounce their American citizenship.
History shows that previous repatriation holidays have come up short. In 2004, Congress lowered the rate to 5.25 percent but the holiday failed to raise the revenue that was projected. A 2011 study by the by the Senate Permanent Subcommittee on Investigations found that the 15 companies that benefited the most from the 2004 repatriation holiday cut more than 20,000 net jobs and cut spending on research. The report found that the companies pursued more stock buybacks and executive stock compensation than job creation.
Curiously, Democrats in Congress strongly opposed the repatriation holiday back then. Sen. Carl Levin (D., Mich.), who chaired the subcommittee at the time, praised the findings of the 2011 report. "There is no evidence that the previous repatriation tax giveaway put Americans to work, and substantial evidence that it instead grew executive paychecks, propped up stock prices, and drew more money and jobs offshore," he raved. "Those who want a new corporate tax break claim it will help rebuild our economy, but the facts are lined up against them." Even the Obama administration said at the time that it would only consider repatriation within the context of tax reform.
Thankfully for American taxpayers, tying infrastructure and tax reform currently sees little political viability. The Trump administration and Republican stakeholders in Congress are wisely keeping tax reform and infrastructure separate.
The one-page summary on tax reform that Treasury Secretary Steven Mnuchin and National Economic Council Director Gary Cohn unveiled earlier this year included no express mention of infrastructure and only limited detail on repatriated offshore corporate profits, restricting it to the context of tax reform. White House officials currently indicate no plans to use repatriation as a pay-for for infrastructure.
Policymakers should continue to ignore these calls to use repatriation holidays and similar gimmicks to pay for infrastructure. Fixing our broken tax code and upgrading the nation's infrastructure are important issues that deserve separate consideration.
A better path is seeking to create a competitive tax code that encourages companies to invest domestically and eliminates the disadvantages that American companies face relative to their global competitors. Reforming the tax code in this permanent way will give companies an incentive to repatriate overseas profits in order invest at home, which will grow the economy and create jobs, something the previous repatriation holiday failed to accomplish.
Christine Harbin is vice president of external affairs at Americans for Prosperity, an organization dedicated to lower taxes, less government regulation and economic prosperity for all.
The views expressed by contributors are their own and are not the views of The Hill.