CFOs Agree: Repatriation Tax Holiday Is a Bad Idea
Corporate Leaders Reject Repatriation Tax Proposal
Washington, May 12, 2011 —At today’s ways and means hearing on international tax reform, all four Republican witnesses, CFOs for large multinational corporations, affirmed their opposition to a one-time corporate repatriation tax holiday. Rep. Kevin Brady introduced such legislation yesterday. The Joint Committee on Taxation estimated that this type of proposal would cost taxpayers $80 billion.
The panel, invited to present the views of multinational corporations included:
· Edward Rapp, CFO, Caterpillar, Peoria, Illinois
· Mark Buthman, CFO, Kimberly-Clarke, Dallas, Texas
· Greg Hayes, CFO, United Technologies, Hartford, Connecticut
· James T. Crines, CFO, Zimmer Holdings, Warsaw, Indiana
In response to Rep. Lloyd Doggett’s questioning, the entire panel unanimously agreed that enacting a one-time repatriation tax holiday would be a mistake. They further elaborated their reasoning in response to a subsequent question from Rep. Mike Thompson. Video of the exchange is available here.
Rep. Doggett had the following reaction to the CFOs’ testimony: “We share the objective of a tax system that contributes to building the American economy, however, we disagree on some of the suggested ways to get there. One key tax issue, on which we have complete agreement, is that standalone corporate repatriation tax proposals, like Rep. Kevin Brady’s, are a very bad idea.”
Background on the Repatriation Tax Break: In general, income earned by U.S. companies in the United States is taxed currently while income earned abroad is only subject to U.S. taxes when it is “repatriated” back to the United States. This system provides obvious incentives to avoid paying current taxes by investing offshore and creating jobs overseas instead of in America. After shifting this money offshore, multinational corporations continually seek ways to bring their foreign profits home without paying their fair share of U.S. taxes.
In 2004, corporate lobbyists convinced Congress to allow multinationals to temporarily bring offshore profits back into the U.S. paying only a 5.25% corporate tax rate, not the regular 35% rate. The claims then were the same as now—give us this tax break and we will invest the repatriated profits here and create jobs. Unfortunately, job creation did not happen last time and it won’t happen now. Money is fungible and efforts to tie repatriated funds to new investment and hiring failed. The evidence shows that the corporate tax holiday was mainly used for stock repurchases and dividends—uses expressly prohibited by the legislation.
The Joint Committee estimates that repeating the tax break will ultimately cost taxpayers $78.7 billion. You can view the Joint Committee on Taxation’s full response to Mr. Doggett’s revenue request by clicking here.
Rep. Lloyd Doggett (D-TX)
201 Cannon HOB
Washington, DC 20002