Tax group: Let’s go territorial

“The motivations of those who support the repatriation holiday are correct — the high U.S. corporate tax rate and our worldwide tax system have erected an economic Berlin Wall around the country, discouraging companies from reinvesting the foreign earnings back home,” Hodge wrote. 

Still, he adds, “the solution is not a one-time tax holiday but a swift and permanent move to a territorial system.”

Hodge also cited IRS data for 2007 that showed that U.S. multinationals paid almost $100 billion in taxes to foreign governments.

Rep. Dave Camp (R-Mich.), the chairman of the House Ways and Means Committee, has indicated he would like to look at how corporate offshore profits are taxed in the discussions over broader tax reform. Camp has said he would like to see the top corporate and individual rates reduced to 25 percent, from their current 35 percent. 

Citizens for Tax Justice, a liberal group, said on Wednesday that a worldwide system that did not allow American corporations to defer paying taxes on offshore profit until they brought it home would best dissuade companies from shipping assets abroad. A territorial system, they said, “would be an even greater failure” than the current system. 

Meanwhile, supporters of a corporate tax holiday say bringing the overseas profits back could help stimulate the economy. But skeptics are far from certain that previous holidays have sparked investment or job creation.