Chamber study backs corporate tax holiday

A corporate tax holiday would be like a stimulus for the private sector, a new report argues.

Douglas Holtz-Eakin, the author of the report, argues in his study that allowing U.S. multinationals to bring the estimated $1 trillion in profits stashed abroad into the country at a much lower tax rate could conceivably create 2.9 million new jobs. 

Holtz-Eakin, an economic adviser to Sen. John McCainJohn McCainMcConnell to pin down colleagues on healthcare McCain returning to Senate in time for health vote Senate Dems launch talkathon ahead of ObamaCare repeal vote MORE’s (R-Ariz.) 2008 presidential campaign, also asserted that a repatriation holiday could lay the groundwork for a broader overhaul of the corporate tax code. 

“It’s absolutely the case that it looks like there could be substantial impacts, and it’s way better to have the impacts here than to have it parked offshore,” Holtz-Eakin said at a Wednesday event hosted by the U.S. Chamber of Commerce, which released the report.

Holtz-Eakin’s study comes as large corporations, including Oracle and Cisco, press for a repeat of a tax holiday enacted in 2004. Rep. Kevin BradyKevin BradyGOP-controlled Congress nears legislative triumph — on Russia Healthcare debacle raises pressure for GOP on taxes Trump administration outlines negotiating priorities for NAFTA MORE (R-Texas), a senior member of the tax-writing House Ways and Means Committee, has introduced a bill that would implement a similar holiday, and the idea has the backing of House Majority Leader Eric CantorEric CantorSpecial interests hide behind vets on Independence Day What to watch for in Comey’s testimony Trump nominates two new DOD officials MORE (R-Va.).

Liberal groups and other skeptics have declared that enacting another holiday would encourage companies to store an increasing amount of profits abroad, in anticipation of future holidays. Studies of the previous holiday have also shown that repatriated funds were used more for stock buybacks than for job creation.

Holtz-Eakin acknowledged in his study that repatriated funds would be used for dividend payments and other financial transactions, but argued that the tax break would also help the economy by putting cash into the hands of investors and consumers.

The study also expresses hope that a repatriation holiday would spur a move toward taxing corporations only on profits made in the United States — the so-called territorial system.

As it stands, multinationals are taxed on profits made worldwide, but can defer paying until that money is brought into the United States, an approach Holtz-Eakin and other proponents of the territorial system say impedes American competitiveness.

Holtz-Eakin arrived at his estimates of 2.9 million jobs and a $360 billion increase in gross domestic product in part through a survey of 10 corporations, which he calls more of an anecdotal examination in the study.

“In trying to do the survey quickly, I don’t think we did it well,” Holtz-Eakin said at the Chamber event.