A senior Republican tax writer on the House Ways and Means Committee is introducing legislation that would give U.S. companies one year to bring home at a lower tax rate as much as $1 trillion in profits parked overseas.
The bill’s lead author, Texas Republican Representative Kevin Brady, who introduced the bill with some Democratic support, describes the proposal as a jobs measure. The proposal, which repeats a 2004 law, would allow U.S.-based companies, for one year, to repatriate income earned overseas at a 5.25 percent rate, instead of the 35 percent statutory corporate rate.
“This is about creating jobs, expanding U.S. businesses and strengthening American companies,” Brady said in a statement today.
The bill includes a penalty for companies that bring home profits at a lower rate and then reduce their workforce. Companies would have to add $25,000 to their taxable income each time they cut their total workforce below the company’s average.
With a 35 percent tax rate, the provision would increase the company’s tax bill by $8,750 for each job cut.
The bill faces obstacles in Congress. House Majority Leader Eric Cantor, a Virginia Republican, supports a repatriation bill while Ways and Means Committee Chairman Dave Camp, a Michigan Republican, has said he wants to address the issue only as part of a comprehensive rewrite of the tax code. Treasury Secretary Timothy Geithner has echoed Camp’s view.
Cantor expressed support today for considering a repatriation proposal before a tax overhaul.
“While fundamental reform will take time, repatriation is an interim step that we can take to encourage businesses to bring investment back to our country,” he said in a statement.
The repatriation issue has received less attention in the Senate. The Obama administration opposes a repatriation holiday.
Critics maintain that the 2004 repatriation holiday didn’t lead to enough job creation to justify the tax break.
“It was a major failure the first time around, and it’s going to be worse this time,” said Chuck Marr, director of federal tax policy at the Center on Budget and Policy Priorities, a Washington organization that supports policies that help low- income Americans. “You make it a regular occurrence, you make it an incentive to shift profits and investments overseas.”
The Joint Committee on Taxation estimated that a repatriation holiday similar to the one Brady introduced would cost the government $78.7 billion in forgone revenue, according to an analysis released today by Representative Lloyd Doggett, a Texas Democrat.
Brady introduced the bill with at least three Democratic co-sponsors -- Representatives Jim Cooper of Tennessee, Jim Matheson of Utah and Jared Polis of Colorado.
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