Treasury Says No Tax Holiday
A coalition of large American multinational corporations is asking the Obama administration for a large tax holiday that would allow them to repatriate billions of dollars of overseas profits tax-free.
They say that the move would provide an immediate boost to the economy by injecting $1 trillion into it. Treasury officials, however, say that the move would cost taxpayers in the end, and would be unlikely to result in any tangible economic benefits.
“To pay for giving this large tax cut once again to a small group of U.S. companies without increasing the deficit, we would have to raise taxes on other U.S. businesses,” Assistant Treasury Secretary for Tax Policy Michael Mundaca said in a blog on the Treasury’s website.
He was referring to the last tax Holiday, in 2004. That year, multinational companies brought back about $300 million in overseas profits at a discounted rate. However, the economic benefits were few and far between, except for those few companies that benefited directly.
“The goal was to encourage U.S. multinationals to pay bigger cash dividends from their overseas subsidiaries and use the cash to make investments in the United States. Unfortunately, there is no evidence that it increased U.S. investment or jobs, and it cost taxpayers billions,” Mundaca said.
Normally, overseas profits are taxed at a 35 percent rate, but only if that money is repatriated.
Multinational corporations say that it encourages them to keep their money offshore. In many cases, they say, the money is never repatriated, but instead invested overseas, where it creates jobs in other markets.
“Our current tax code provides every incentive for U.S. companies to never, ever repatriate monies earned overseas back to the United States,” said David Chavern, COO of the U.S. Chamber of Commerce.
“Why bring it back just to send a large chunk of it to the government? No other major economy taxes foreign earnings in this way. The better choice for any rational company would be to just leave it overseas and invest it there – creating jobs in other countries that should be created here.”
But the companies lobbying for the move are just a handful of America’s largest corporations, many of which are notorious for outsourcing. The group including Apple, Google, Microsoft and Pfizer.
Treasury officials say that rewarding those companies with tax breaks will require taxes to go up for other American companies in order to not add to the deficit.
