Several Congressional Republicans have been promoting the idea of enacting a tax repatriation holiday, which would allow multinational corporations to bring money that they have stowed offshore back to the U.S. at an extremely low tax rate (instead of the usual 35 percent). House Republicans have introduced legislation that would allow corporations to repatriate money at a 5.25 percent tax rate, while House Budget Committee Chairman Paul Ryan (R-WI) said this week that a repatriation holiday is a “good idea” that he’d like to see “every day.”
This comes even though a similar tax holiday in 2004 failed to deliver its promised economic growth or job creation. And other problems with this sort of corporate tax giveaway is that it encourages corporations to shift assets offshore, in anticipation of the next holiday. After all, why pay taxes at 35 percent if you think Congress will keep giving you a chance to pay 5 percent?
Research from Northwestern University has shown that corporations actually moved more funds offshore after the 2004 repatriation holiday, in anticipation of Congress enacting another holiday sometime, and that “by the end of 2006 the total ‘permanently’ reinvested abroad had exceeded the 2004 peak.” In fact, as the Center on Budget and Policy Priorities pointed out, “in each of the three years following the 2004 tax holiday, these companies increased the amounts of new ‘permanently reinvested’ foreign earnings by three times as much, on average, as they had in the each of the ten years before the holiday”:
According to the Joint Economic Committee, a repatriation holiday would cost nearly $80 billion over 10 years. Mitt Romney, Herman Cain, and Tim Pawlenty have all endorsed this corporate tax giveaway.