Liberal group fires back on repatriation

Citizens for Tax Justice, a liberal group, is the latest to jump back into the fray over a proposed corporate tax holiday, releasing a report that found that 20 large U.S. multinationals have tripled the amount of profits they have offshore in the five years or so since the end of a previous tax holiday.

“Rewarding corporations that shift profits to offshore tax havens is a terrible policy,” CTJ, which also has significant ties to organized labor, said in its Friday report. “It was tried before, it failed, and it should not be repeated.”

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The study found that Johnson & Johnson, for instance, held $37 billion outside of the United States at the end of 2010, up from $11.9 billion in 2005. Hewlett-Packard’s offshore holdings, meanwhile, zoomed from $1.2 billion in 2005 to almost $22 billion in 2010. 

CTJ was responding to an analysis released this week by the New Democratic Network, another left-leaning group. 

In its study, NDN suggested that it did not believe that enacting a second repatriation holiday less than a decade after the first would encourage corporations to shift more profits to other locations, as critics of the idea have said.

And, unlike a congressional analysis released this year, the group also projected that the holiday would raise revenue — close to $9 billion over a decade.

The dueling reports come as such corporations as Apple, Cisco, Google and Oracle are lobbying hard for another crack at a repatriation holiday, with proponents saying the idea is one of the few feasible options policymakers have right now to inject new capital into the struggling economy. 

One of the current proposals would, as the previous holiday did, allow multinationals to bring profits home from abroad at a 5.25 percent tax rate, instead of the top corporate rate of 35 percent.

Groups of both Democrats and Republicans on Capitol Hill have either publicly backed or sounded open to the idea of a holiday — including a pair of lawmakers who don’t often find common ground, House Majority Leader Eric Cantor (R-Va.) and Sen. Chuck Schumer (N.Y.), the chamber’s No. 3 Democrat. 

But the idea also has strong opponents in Congress, with foes citing reports that showed that companies used the last holiday more for stock buybacks and dividend payments than to create jobs.

The Obama administration has also said it will look at the idea only as part of a broader overhaul of the corporate tax code. And some major corporations, including IBM and Caterpillar, have signaled that they believe the repatriation push might distract from the bigger prize of tax reform.

In its study released Thursday, NDN challenged the findings of a report released this year by Congress’s nonpartisan Joint Committee on Taxation, which found that a new holiday could lose close to $80 billion over a decade. 

In particular, the NDN report — authored by Robert Shapiro, a Clinton administration official, and Aparna Mathur — took issue with JCT’s projection that corporations would park more profits offshore in the aftermath of another holiday, in preparation for future ones. 

The study was also skeptical that, as JCT believes, corporations would hurry to bring profits into the United States at holiday-level tax rates that would have eventually repatriated at the regular tax rate. According to NDN, repatriated profits did shoot up during the 2004 holiday, but then basically returned to pre-holiday levels.

As for CTJ, it’s clearly more on the side of the Joint Taxation Committee, declaring that the NDN report “assumes away” the idea that corporations would build up offshore profits in anticipation of future holidays.

Using annual corporate reports, CTJ found that 20 American corporations greatly increased the amount of profits they held since the 2004 holiday ended, from $152 billion in 2005 to $426.5 billion in 2010. 

Of course, given increased globalization, the companies would almost certainly argue that they hold profits in other countries for more than just tax reasons.

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