Several multinational corporations last week launched a lobbying campaign to press for what’s known as a tax repatriation holiday — a window in which they can bring overseas profits back to the U.S. at a dramatically lower tax rate. Profits brought back to the U.S. are usually subject to the statutory corporate income tax rate.
The corporations — including Cisco, Microsoft, Apple, Qualcomm, Pfizer, Kodak, and Duke Energy — have hired big-name lobbyists to advance their efforts. And they’ve evidently picked up the endorsement of 2012 Republican presidential contender Mitt Romney:
Likely presidential candidate Mitt Romney wants to use the promise of huge tax breaks to entice large corporations to move their overseas profits back to the United States, in hopes they would create a wealth of new jobs for US workers. The payoff would be significant and almost immediate, generating “hundreds of thousands — if not millions — of good, permanent, private sector jobs,’’ Romney told Republicans in Bartlett, N.H., last weekend.
While Romney and the corporations say that such a tax holiday would lead to massive domestic investment and job creation, the Bush administration tried such a policy already. It turned into a windfall for shareholders and corporate CEO’s, but didn’t deliver the promised domestic investment.
In 2004, Congress passed the Homeland Investment Act, allowing companies to bring back offshore profits in 2005 and pay a tax rate of just 5.25 percent, far below the 35 percent corporate tax rate. Congress passed the bill because corporations said the money would go towards domestic job creation. However, according to work done by the National Bureau of Economic Research, 92 percent of the nearly $300 billion that companies brought back went to share buybacks and increased dividend payments.
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.’’ The Congressional Research Service also studied the tax holiday, and “found no evidence that the tax break resulted in ‘a corresponding increase in domestic investment or employment.’’’
Romney has previously endorsed huge corporate tax cuts as a way to boost job creation (even though there’s no evidence that such job creation would actually occur). A repatriation holiday, according to the research, would have similarly lackluster results.