2012 GOP presidential nominee Mitt Romney, speaking at a Business Roundtable event in Washington DC today, called for the repeal of the tax on corporate profits that is levied when those profits are returned (repatriated) to America. Repealing the tax, Romney said, would drive investment in the United States and spur job creation. In the past, however, temporary tax holidays for profits stored overseas have not led to the job creation that proponents promised.
Instead of creating jobs, companies used a 2004 repatriation tax holiday to line their executives’ pockets, paying stock dividends and buying back shares. The holiday “didn’t accomplish the stated goals of bringing jobs and investment to the US,” according to former member of President Bush’s Council on Economic Advisers.
That failure evidently means nothing to Romney, who seemed to call today for permanently exempting repatriated profits from taxation:
ROMNEY: We have this tax, as you know, the repatriation tax. If you make a lot of money in some other foreign country and you want to leave it there, we don’t tax you. But if you want to bring it home, to invest here, then we do tax you, up to 35 percent. That doesn’t make a lot of sense to me. If you want to bring your money home, please bring it home. Bring that trillion-plus dollars, bring it here. Invest in new plants and equipment and hire people. And I know some people say, ‘Yeah but, companies might put it out as dividends.’ Well that’s OK too! I’d rather have you invest in– but get it out to people, get it out to retirees. I mean, what’s happened to the interest rate on their CDs? Get money out there. Let them use that money out there to buy things and put more Americans to work.
The repatriation gimmick didn’t just fail to create jobs the last time it was tried — it was followed by job destruction. The companies that benefited most laid off tens of thousands of workers after the holiday ended. And though Romney today claimed that he would balance the budget in eight to 10 years, repealing the tax on repatriated profits wouldn’t help him there either. The House GOP’s repatriation holiday would have cost $80 billion over 10 years — getting rid of the tax altogether, as Romney seemed to suggest today, would carry an even larger price tag.
But Romney is right that it makes little sense to let corporations dodge taxes by holding money overseas. Another solution that has been proposed, however, is to adopt a global tax system that taxes multinational corporations no matter where their profits are made and provides credits to avoid double taxation. This type of system would prevent corporations like Apple from dodging billions in taxes by opening subsidiaries in low-tax (or no-tax) countries, raising valuable revenue for the government.