Tech groups ramp up push for corporate tax holiday

by Vicki Needham - 11/02/11 7:39 PM ET

He argued there is more than $1 trillion earned by U.S. businesses “trapped overseas that could be brought back and invested here in America at virtually no cost to the taxpayer.”

In addition, the Hagan-McCain measure would enable American businesses to bring home approximately $535 billion in global earnings to the U.S. economy.

“We think this study adds to the bevy of data that we can do something to spur our economy that is right in front of us,” Ramsey said.

In a May estimate, the JCT found that one proposed general repatriation plan would bring in roughly $25 billion over the first three years, but eventually lose close to $79 billion over a decade, mainly because corporations would repatriate funds during the holiday that had been earmarked for a later date, thus decreasing the Treasury’s take.

Those projections were based off of two generic holidays instead of the House legislation, that would allow multinationals to bring profits kept abroad to the U.S. at a top rate of 5.25 percent in either 2011 or 2012 — vastly lower than the current top corporate rate of 35 percent. Under current law, U.S. corporations are taxed on profits they make around the world, but can defer paying until they bring that revenue into America.

Last week, the tech industry teamed up and sent a letter to the supercommittee pressing the issue. That letter came a day after Rep. Dave Camp (R-Mich.), the chairman of the House Ways and Means Committee, unveiled a draft proposal that would shield almost all foreign corporate profits from U.S. taxation and include a repatriation provision.

In the another estimate released Wednesday, the JCT found that scrapping nearly every corporate tax break would generate enough revenue to reduce the corporate tax rate to 28 percent, perhaps underscoring the challenge policymakers face in trying to overhaul the tax code without adding to budget deficits, according to a Wednesday estimate.

The estimate was requested by Democrats on the House Ways and Means Committee.

The findings reflect the difficulty policymakers face in lowering the corporate tax rate to 25 percent — a per Republican efforts — and avoid an increase in budget deficits.

The joint committee found that slicing the top corporate rate, currently at 35 percent, to 28 percent would cost roughly $960 billion over a decade — $717.5 billion for the rate reduction itself, and another $243 billion for other “interactions.”

But Thomas Barthold, the committee’s chief of staff, also noted that the committee did not try to predict how businesses would react to that sort of tax overhaul.