Congress should not endorse another big tax break for overseas corporate profits because the last one in 2004-2005 was a costly failure, said U.S. congressional investigators in a report released on Monday.
With an army of lobbyists pushing on Capitol Hill for a repeat of the Bush administration's 2004-2005 program, the head of the Senate Permanent Subcommittee on Investigations urged lawmakers to reject another corporate give-away.
We can't afford a tax break that would deepen the deficit, disadvantage domestic firms, and push more corporate dollars offshore, while failing to stimulate the economy, said Senator Carl Levin in a statement on his panel's report.
Levin was joined by Senator Kent Conrad, a fellow Democrat, in writing to Congress' deficit-reduction super committee, urging members to refuse lobbyists' pleas for a second overseas corporate income repatriation tax holiday.
Bipartisan legislation that would allow the tax break -- estimated to cost taxpayers nearly $80 billion over 10 years -- was introduced last week in the Senate, with a similar bill offered months ago in the House of Representatives.
The repatriation tax holiday idea has some support, but analysts do not expect it to be approved on its own. Rather, it could be tacked onto a broader tax and spending bill.
I'm hoping the facts can break through the lobbying frenzy over yet another corporate tax give-away that makes no sense and would damage our economic recovery, Levin said.
The subcommittee's report found that the last repatriation tax holiday cost the Treasury at least $3.3 billion in net revenue lost over ten years and that it produced no appreciable increase in U.S. jobs or domestic investment, and led to U.S. corporations directing more funds offshore.
A second such tax break, it said, would cut government revenues, fail to create jobs and increase incentives for U.S. corporations to move more jobs and investment abroad.
The report can be found at http://hsgac.senate.gov following the links to Subcommittees, Investigations, and, at the bottom of the webpage, Related Files.
At issue is a stash of profits estimated to be worth up to $1.5 trillion that U.S. multinationals have parked overseas to avoid paying the 35 percent U.S. corporate income tax rate.
The companies want to bring these earnings home to the United States, but they do not want to pay the full tax on them. So they are pressing for a tax break.
In 2004-2005, they got one and 843 corporations brought home $362 billion in overseas income at a 5.25 percent tax.
As they did six years ago, proponents of the tax break today are representing it as a boost to jobs and the economy, though doubts about this have been raised in numerous studies, in addition to the Permanent Subcommittee's report.
Studies released last week by two think tanks said the 2004-2005 tax break did little or nothing to boost the economy or create jobs, despite promises that it would. They said that another such tax break would likely have the same outcome, going to bonuses and dividends rather than new investments.
One of the studies came from the left-leaning Institute for Policy Studies; the other from the conservative Heritage Foundation in an unusual meeting of the minds.
The Levin report was slammed late on Monday by WIN America, a coalition of corporations that is spearheading the lobbying push with a multimillion-dollar promotional campaign.
The group called the Levin report a one-sided ... mash-up of old studies that ignores a slew of more recent economic evidence and analysis that shows repatriation benefits the economy. It cited pro-repatriation studies by the U.S. Chamber of Commerce, the nation's largest corporate lobbying group, and a centrist policy group called the New Democrat Network.
WIN America's member companies include high-tech giants Apple Inc, Cisco Systems Inc, Oracle Corp and Microsoft Corp.
Goldman Sachs analyst Alec Phillips said last week that another repatriation holiday would most likely increase dividend payments and share buybacks ... we would not expect a significant change in corporate hiring or investment plans.
He added that the issue will receive additional attention over the next several weeks. However, we are skeptical that another repatriation tax holiday will become law this year.
(Reporting by Kevin Drawbaugh; editing by Anthony Boadle)