Former SEIU President Stern Splits With Labor, Backs Tax Holiday

Andy Stern, former president of the second-largest labor union, said he backs easing tax rules to encourage companies with overseas profits to return the cash to the U.S., a position that puts him at odds with organized labor.

Stern, who retired in April 2010 after 14 years as head of the 2.2 million-member Service Employees International Union, said in an interview with CNBC that a tax holiday would create jobs and help revive the economy. Stern’s former union has joined six groups including the AFL-CIO and the American Federation of State, County and Municipal Employees to oppose a break on repatriated offshore profits, according to a May 12 letter to lawmakers.

U.S. companies with overseas operations may have as much as $1.3 trillion of profits held overseas, the administration’s Economic Recovery Advisory Board reported in August 2010. Corporations owe taxes on income they earn from overseas operations under U.S. law. Taxes on such profit can be deferred until the cash returns.

“We have $1 trillion that’s not in play,” Stern said on CNBC. “We have people that want to bring it back but the current tax rate really inhibits that money coming back.”

A repatriation holiday is backed by companies including Mountain View, California-based Google Inc. (GOOG) and San Jose, California-based Cisco Systems Inc. (CSCO) Some lawmakers have urged legislation to set a low tax rate for overseas profits.

Letting companies bring home overseas profits would help with capital gains, pension funds and dividends, Stern said.

“It’s stimulus for free,” he said.

The AFL-CIO, the nation’s largest labor federation with 12.2 million members, has said giving a break to companies will encourage more to move profits into overseas accounts. Congress adopted a similar tax holiday in 2004.

“This is a really, really, really bad idea,” Kelly Ross, deputy policy director at the AFL-CIO, said in an interview. “It encourages multinationals to believe they’re going to keep getting this break.”

To contact the reporter on this story: Stephanie Armour in Washington at

To contact the editor responsible for this story: Larry Liebert at

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