Bloomberg, Bill Clinton Backs U.S. Tax Holiday on Foreign Profits, With Caveats:
Former U.S. President Bill Clinton endorsed a tax holiday on repatriating offshore profits with conditions, taking a position contrary to the Obama administration.
“I favor it under certain circumstances,” Clinton said in an interview with Bloomberg Television’s Al Hunt yesterday in Chicago. He suggested an approach that would give companies a 20% tax rate on repatriated profits, which could be reduced to 10% if they “reinvest it in increasing employment in America.” … The main Republican proposal in Congress includes a 5.25 percent rate and a penalty for job cuts.
U.S. multinational corporations have more than $1 trillion in profits outside the country that would be taxed if brought back to the U.S. …
Among the opponents of a repatriation holiday is the Treasury Department under Obama and Secretary Timothy Geithner. The Obama administration has warned that a tax holiday wouldn’t create jobs and noted the cost in forgone revenue, which is estimated at $78.7 billion over 10 years. Under current law, U.S.-based companies don’t have to pay taxes on profits they earn outside the country until they bring the money home. When they repatriate the money, they face a 35% top corporate tax rate. They receive credits for taxes paid to other governments. …
The problem with a repatriation holiday is that companies haven’t actually paid taxes in the countries where they earned the income, said Edward Kleinbard, a law professor at the University of Southern California. “They are advocating for completing the circle of global aggressive tax planning under which they will pay close to no tax anywhere in the world,” said Kleinbard, who was chief of staff at the congressional Joint Committee on Taxation. …
Clinton is the latest Democrat to express openness to a repatriation holiday, joining Senators Charles Schumer of New York and Kay Hagan of North Carolina, who both voted against a similar proposal in 2009. …
Kleinbard said the potential revenue losses are real, albeit smaller if the tax rate were set higher than 5.25%. “You’re starting $80 billion in the hole with repatriation, so you’re not really raising any money until you get back to zero,” he said. “So there’s no net money to go into an infrastructure bank or anything else.” Kleinbard added that the details of how companies are allowed to use foreign tax credits against their repatriated income would be important.
