By Bernie Becker - 10/12/11 12:55 AM EDT
Senate Democrats might be looking to break President Obama’s jobs package into chunks, but lawmakers in both chambers and both parties are unsure about the idea of linking a corporate tax holiday with an infrastructure bank.
Top Democrats like Sen. Charles Schumer (N.Y.) had started a push to meld proposals to give corporations a tax break on their offshore profits with infrastructure initiatives even before the Senate voted down a procedural motion on the president’s jobs plan Tuesday.
Meanwhile, leaders of the congressional tax-writing committees from both parties would like to keep discussion of repatriation of offshore corporate profits within the broader push for tax reform.
A spokesman for House Majority Leader Eric Cantor (R-Va.), among the more prominent policymakers behind the repatriation proposal, said he has doubts about creating an infrastructure bank.
“The majority leader has long supported repatriation — it’s a common-sense, bipartisan step we could take immediately to bring capital back to America,” the spokesman, Brad Dayspring, told The Hill. “He has expressed concerns about the infrastructure bank.”
On the other side of the aisle, Sen. Carl Levin (D-Mich.) has blasted the idea of a corporate tax holiday, declaring that it would encourage multinationals to keep increasing amounts of profits offshore and citing data that says the proposal would lose billions of dollars over 10 years.
The Michigan senator also suggested Tuesday that, while he backed an infrastructure bank, he could not support another tax holiday if that were the price.
“If people buy the argument that repatriation is good tax policy, good public policy, good jobs policy, then I think they’re wrong,” Levin, the chairman of the Senate’s Permanent Subcommittee on Investigations, told reporters on Tuesday.
Sen. John McCain (R-Ariz.), who recently introduced a repatriation measure with Sen. Kay Hagan (D-N.C.), dismissed looking at the two items in tandem, after Senate Majority Leader Harry Reid (D-Nev.) floated the idea last week.
“The issue of $1.4 trillion parked overseas is very different from the infrastructure bank that Sen. Reid envisions,” McCain said at a news conference last week. “I think we would be more than willing to address that issue as well, but why should they be tied together?”
The discussion of linking the two proposals comes as Democrats begin searching for ways to regroup in their push for jobs legislation. The White House has said it supports Democratic efforts on Capitol Hill to break its bill into pieces.
The talk also comes as the debate over a repatriation holiday heats up. McCain and Hagan dropped their bill last week, and Levin released a report Monday calling a corporate holiday enacted in 2004 a failure.
Pro-repatriation forces say their idea is one of the few economic proposals in Washington right now to have bipartisan support, and that corporations will merely keep their offshore profits out of the U.S. without the incentive.
But the study released by Levin found that the corporations that relied the most on the 2004 holiday shed jobs in the aftermath and didn’t quicken their pace of investment in research and development.
House and Senate repatriation measures would offer slightly different tax breaks.
Under a House measure sponsored by Reps. Kevin Brady (R-Texas) and Jim Matheson (D-Utah), corporations that repatriate offshore funds would pay a 5.25 percent rate, an 85 percent discount from the top corporate rate of 35 percent and the same rate as the 2004 holiday. Companies would also face penalties if they shed jobs while taking advantage of the holiday.
Hagan and McCain’s measure would bring the tax rate down to 8.75 percent, with companies that hire workers getting the chance to pay as little as 5.25 percent. The Senate legislation also includes disincentives for businesses to eliminate jobs.
While repatriation backers are bullish on opening the borders for offshore profits, they are less concerned about how the funds are used. An official with the WIN America Campaign — a lobbying coalition that includes several Silicon Valley heavyweights — told The Hill that the group would “let Congress and the administration determine how best to use the revenue generated.”
On Tuesday, some Senate Democrats expressed other concerns about linking repatriation and infrastructure bank, including the need to make sure that lawmakers find a permanent fix to the issue of offshore corporate profits and that any corporate tax holiday leads to job creation.
Like Levin, Sen. Robert Menendez (D-N.J.) said that studies had shown that the 2004 holiday had failed in that respect.
“I’m for repatriation, as long as we have a clear nexus in which it produces jobs,” Menendez said. “So, how it’s structured with the infrastructure bank would be important.”
And Sen. Ron Wyden (D-Ore.) said he was most concerned about ensuring that there aren’t continued repeats of tax holidays.
“If you don’t do something permanent, the history is, they just say we’ll just hold off until the next one,” Wyden said.
On Tuesday, Rep. Sandy Levin (D-Mich.), a repatriation holiday skeptic and the ranking member on the House Ways and Means Committee, discussed another way to consider the idea — as part of comprehensive tax reform.
“Here, Chairman Camp and I have thus far agreed,” Levin said, referring to the head of the Ways and Means panel, Rep. Dave Camp (R-Mich.).
The Obama administration and Sen. Orrin Hatch (R-Utah), the ranking member on the Senate Finance Committee, have indicated that they would also like to look at repatriation in the tax overhaul discussions.
Sandy Levin, the senator’s brother, added that he had questions about proposals, like the one from McCain and Hagan, that would implement a holiday that gives corporations the chance to further reduce their tax bill by adding U.S. jobs.
“How would you know it wouldn’t have happened anyway?” Levin asked. “There’s a burden of proof.”