A group of corporations have launched a campaign, known as “WinAmerica,” in an attempt to convince Congress to implement a corporate tax repatriation holiday. Such a holiday would allow corporations that have stashed money offshore to bring those funds back at a dramatically lower tax rate than the 35 percent to which they are usually subjected.
The justification for such a move is job creation, but Congress already tried a repatriation holiday in 2004, with disastrous results: the corporations that benefited most from the tax holiday wound up cutting jobs in subsequent years. Kristen Forbes, who was on President Bush’s Council of Economic Advisers when the last repatriation holiday was approved, told the Boston Globe that the policy “didn’t accomplish the stated goals of bringing jobs and investment to the US.’’
House Republicans have proposed a repatriation holiday that would have corporations pay a 5.25 percent tax rate on any money they repatriate. But even that is too high for new presidential contender Gov. Rick Perry (R-TX), who said today at an event in New Hampshire that corporations should be allowed to repatriate money without paying any taxes at all:
And here’s another issue from my perspective. Corporate profits that are offshore, that we tax at 35 percent. We know for a fact that money’s not coming back. They’re going to leave that offshore. So why not look at, and talk about, how you repatriate those dollars and have those dollars focused on job creation, but allow them to come back in at a substantially lower rate than 35 percent. Say, something like, if it’s clearly going for job creation, like zero, to get this economy working again.
Even the corporations lobbying for a repatriation holiday haven’t gone as far as to call for the elimination of taxes on repatriated earnings, instead calling for simply a “reduction.”
The fact that the 2004 repatriation holiday didn’t create the jobs that were promised is not even the worst part of its legacy. Following that holiday, corporations increased their offshore holdings, moving more capital out of the country, in anticipation that another holiday would come along. Perry’s proposal would give the corporations who pushed money offshore everything they could have hoped for.
The repatriation holiday supported by the House GOP would cost nearly $80 billion over 10 years, a price that would obviously rise significantly under Perry’s plan to simply scrap any attempt to raise revenue from repatriation at all. Amongst GOP candidates, Herman Cain has also called for tax-free repatriation, while Mitt Romney has endorsed a repatriation holiday, but not a particular rate.