Study touts indirect benefits of corporate tax holiday

Under that tax break, U.S. multinationals could take profits to the U.S. at a 5.25 percent rate, vastly lower than the top corporate rate of 35 percent.

Critics of that policy, including Sen. Carl Levin (D-Mich.) and other prominent lawmakers, have said the companies that most took advantage of the policy also eliminated U.S. jobs and did not quicken the pace of their research spending.

Meanwhile, those companies did increase dividend payments and executive pay, Levin’s Permanent Subcommittee on Investigations found in a report released this week that called the 2004 holiday a failure that should not be repeated.

But repatriation backers – like the WIN America Campaign, the lobbying coalition that includes Apple, Duke Energy, Cisco and others – have long said that offshore corporate profits are “trapped” abroad due to the high U.S. tax rate.

They add that, even if the offshore profits were disbursed to shareholders, they would still inevitably be injected into the U.S. economy.

That’s largely what the New America Foundation study found. A second holiday, the report said, would entice some $1 trillion to the U.S., with around $581 billion in after-tax dividends finding their way to shareholders.

{mosads}Of that total, $192 billion will flow to U.S. households, and Tyson and her colleagues predict that those households will spend about 25 to 40 percent of it – or between $25 billion and $38 billion.

All in all, the study predicts that a new repatriation holiday would mean $36 billion in added revenue for the Treasury.

Pro-repatriation forces are also claiming momentum these days, with bipartisan holiday measures having been introduced in both chambers.

Sen. Kay Hagan (D-N.C.), a co-sponsor of the Senate measure, released a statement praising the New America Foundation study, and a group of House Republican freshmen who are behind the idea cited the report several times in a Thursday conference call.  

Rep. James Lankford (R-Okla.) and his fellow freshmen said they viewed a tax holiday as a bridge to an overhauled tax code where American corporations would only be taxed on profits made in the U.S.

“This is an opportunity that’s too big to miss,” Rep. Richard Hanna (R-N.Y.) told reporters.

Still, the Obama administration and top Democrats and Republicans on the congressional tax-writing panels have said they would prefer to look at repatriation and offshore profits through the lens of broader tax reform.

Opponents of a new holiday also point out that the policy is projected to cost the Treasury billions of dollars worth of revenue over a 10-year period, and also say that it would encourage corporations to stash more money abroad.