American profits for the American people

{mosads}The issue of repatriation is straightforward: Washington should incentivize the return of profits earned by U.S. companies in foreign countries so that American money can be used to create American jobs. As it stands today, U.S. businesses are holding approximately $1.4 trillion dollars of profits overseas because they’d rather invest it there than get hit with a 35 percent tax just to bring it home.

During the 2004 Homeland Investment Act, Qualcomm brought back $500 million, which resulted in the hiring of 8,200 employees and the expansion of offices in California, North Carolina and Nevada. According to the Bureau of Labor Statistics (BLS), 98 percent of the average annual private sector increase between 2000-2007 occurred during the three-year repatriation period from 2004-2006. Because of the current 35 percent tax, Qualcomm holds more than 60 percent of its $20 billion in cash overseas.

Several studies indicate that repatriation is a common-sense, bipartisan policy that would help move our economy forward.  In one study, former Clinton Administration economist, Dr. Robert Shapiro, and an American Enterprise Institute scholar, Dr. Aparna Mathur, estimate repatriation will generate $8.7 billion in revenue for the Treasury.  Another study by former Congressional Budget Office Director Douglas Holtz-Eakin found that a reduced repatriation rate could create approximately 2.9 million jobs for Americans and increase GDP by $360 billion.

Last March, we introduced The Job Creation and Innovation Investment Act of 2011 (H.R. 1036) which would establish a zero percent tax rate for funds brought back to the United States that are invested in research and development, new manufacturing and facility expansion. If companies wish to use the money they bring back entirely at their own discretion then they will be subject to a 5.25 percent nominal tax rate, which still amounts to a nearly 30 percent reduction.

Senators John McCain (R-AZ) and Kay Hagan (D-NC) recently introduced legislation that would incentivize U.S. businesses to bring home offshore profits at a greatly reduced tax rate of 8.75 percent.  In an effort to further encourage hiring by U.S. businesses their bill allows companies to obtain up to a 5.25 percent effective repatriation rate if they expand their U.S. payroll during 2012.

Rather than another tax payer funded bailout paid for with money borrowed from countries like China, we should allow the American private sector to use their resources to stimulate the economy. With uncertainty plaguing the economy and the difficulty of passing comprehensive tax reform during an election year, Republicans and Democrats must turn their immediate focus on issues like repatriation and other areas of common ground to strengthen our economy. It’s time for the U.S. government to get out of the way and allow the American private sector to create real jobs.

Bilbray represents California’s 50th Congressional district, he is a member of the House Energy and Commerce Committee.