Representative Shelley Berkley, a Nevada Democrat, is the latest lawmaker to consider legislation allowing multinational companies to send offshore profits to the U.S. at a reduced tax rate.
Her proposal, which was confirmed yesterday by Berkley's communications director, David Cherry, would allow companies to return profits to the U.S. at a 25 percent tax rate, 10 percentage points below the maximum statutory rate. Most companies publicly supporting a holiday, such as Duke Energy Corp., have spoken favorably of the 5.25 percent rate that is being offered by Representative Kevin Brady, a Texas Republican.
Berkley's openness is a sign of further thawing in Democratic opposition to a repatriation holiday, which they have argued would be a giveaway to companies that wouldn't have to use the money to create jobs. As recently as 2009, 48 members of the Senate Democratic caucus opposed a proposed repatriation holiday.
Under Berkley's proposal, which hasn't been introduced, companies can lower the tax rate on their repatriated profits by increasing their payroll. The rate could go as low as 5.25 percent if companies increase their payroll by 14 percent. Like Brady and a host of companies including Cisco Systems Inc. and Pfizer Inc., Berkley's office is portraying a repatriation holiday as an inducement for companies to create jobs.
'Incentivize' Jobs
The legislation would “incentivize the creation of new jobs at home by directly linking the rate at which these earnings are taxed with the expansion of a company's payroll,” according to a summary of the bill that Berkley's office has circulated. “Even a portion of this money returning to the United States will result in a sizable boost to our economy.”
Berkley, who is seeking a Senate seat from Nevada and sits on the Ways and Means Committee, wouldn't restrict how companies use their repatriated profits. Companies were criticized for using the 2004 holiday to boost dividend payments to shareholders.
“Ms. Berkley's voice is a welcome addition to the growing number of members, Republican and Democrat, that recognize the need to bring this money home,” said Doug Thornell, a spokesman for the WIN America Coalition, which counts Google Inc., Cisco and Pfizer as members.
Other Democrats, including Senators Charles Schumer of New York, Kay Hagan of North Carolina and John Kerry of Massachusetts, have said they would support a repatriation holiday to stimulate job creation. They all voted against a repatriation holiday that was proposed in the Senate in 2009.
Infrastructure Bank
Schumer has said Senate Democrats might support a repatriation holiday if the tax revenue generated went to fund an infrastructure bank.
Brady's bill addresses concerns about job losses by requiring companies to add $25,000 to their taxable income each time they reduce their total work force below the company's average workforce. With a 35 percent tax rate, the provision would increase a company's tax bill by $8,750 for each job reduction.
Repatriation supporters must still overcome criticism from Democrats, including Representative Lloyd Doggett of Texas, about a holiday's cost. The congressional Joint Committee on Taxation has said a repatriation holiday at 5.25 percent would cost $78.7 billion in foregone revenue over 10 years.
Bloomberg News
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