Potential 2012 Republican presidential candidate Mitt Romney (R) earlier this month endorsed giving multinational corporations a huge tax break by allowing them to bring money they have stashed offshore back to the U.S. at a dramatically lower tax rate. Usually, money brought back to the U.S. is subject to the statutory corporate tax rate of 35 percent.
A group of multinational corporations have launched a quiet lobbying campaign to try ginning up interest in this idea, which is known as a tax repatriation holiday. In addition to Romney, they seem to have won another convert in House Majority Leader Eric Cantor (R-VA), who supported a tax holiday during a speech yesterday on his “pro-growth economic plan“:
We must make America competitive again by lowering the corporate tax rate to at least 25% – equal to our competitors. And we will do it as part of fundamental tax reform, which will minimize the impact on government revenues.
Forging consensus on this type of fundamental tax reform will take time, so in the meantime I propose that we allow U.S. multinational companies to bring back almost $1.2 trillion in overseas profits at a lower tax so they can invest in our economy here at home.
Both the corporations themselves and the Republicans supporting a tax holiday claim that allowing companies to repatriate billions of dollars at an extremely low tax rate will spur domestic investment and job creation. However, in 2004 Congress approved a repatriation holiday; it resulted in corporate executives lining their own pockets, not investing in new jobs.
Kristen Forbes, who was on President Bush’s Council of Economic Advisers when the last repatriation holiday was approved, said that it “didn’t accomplish the stated goals of bringing jobs and investment to the US.’’ In fact, the holiday encouraged corporations to stash more money overseas, because they figured they could sucker Congress into consistently approving tax holidays.
The Obama administration and Democrats in Congress have, thus far, been opposed to the idea of a repatriation holiday occurring outside of comprehensive corporate tax reform. Sen. Kent Conrad (D-ND) said that approving another tax holiday “makes a farce out of the whole system.” Even Sen. Orrin Hatch (R-UT), who is usually adamantly opposed to fair corporate taxation, said of a repatriation holiday, “probably from an accounting and tax standpoint, that’s not a good way to go.”