The company that left Louisiana is going to pay a 5 percent tax on the widgets they make overseas, and the company that stayed in Louisiana is going to pay a 35 percent tax,'' said Sen. John B. Breaux, D-La. ``If that isn't an incentive to leave, I don't know what is.''
well duh, senator breax
you'd think a southerner would know a thing or two about horses, barns and doors.
bayarea.com
Amnesty proposed for overseas profits
U.S. TECH COMPANIES BACK SENATE BILL FOR SIX-MONTH TAX HOLIDAY
By Edmund L. Andrews
New York Times
WASHINGTON - U.S. corporations that have deferred taxes for years on the profits they made overseas could be in line for a huge windfall from Congress.
Hoping to bring more investment to the United States, the Senate Finance Committee approved a bill Wednesday that would give a one-time tax holiday to companies that have accumulated as much as $400 billion in foreign profits on which they have yet to pay American taxes.
U.S. companies can usually defer paying taxes on foreign profits as long as they keep the money outside the United States. Much of that money is reinvested in foreign operations, and some is parked in passive investments.
The Senate bill, which is part of a much broader bill to overhaul laws on international corporate taxation, would let companies bring those profits back and pay a tax rate of only 5.25 percent.
Supporters say the six-month tax holiday could lure as much as $300 billion back into the United States, which in turn would increase investment and create jobs.
To press their case, companies such as Hewlett-Packard have formed a broad coalition that includes the likes of Eli Lilly, Merck, Intel, Sun Microsystems and Dell Computer.
One of the coalition's main lobbyists is Bill Archer, the former chairman of the House Ways and Means Committee, and his former chief of staff, Donald Carlson.
``The question is, do we want this money invested in equipment and plants in Egypt or do we want it invested in the United States?'' Carlson said. ``To get this much bang for the buck is a rarity.''
But many tax experts, including top tax officials in the Bush administration, say the move would be a mistake because it would validate the strategies of companies that spent years sheltering their overseas profits.
``The company that left Louisiana is going to pay a 5 percent tax on the widgets they make overseas, and the company that stayed in Louisiana is going to pay a 35 percent tax,'' said Sen. John B. Breaux, D-La. ``If that isn't an incentive to leave, I don't know what is.''
Critics also warn that there is no guarantee the companies will invest their repatriated profits in new factories or larger workforces. Indeed, Republican lawmakers defeated an amendment offered by Breaux on Wednesday that would have required companies to reinvest their foreign profits in things such as new equipment.
`A good deal'
The biggest beneficiaries of the legislation would be technology companies such as HP and Intel as well as pharmaceutical giants such as Merck and Eli Lilly.
Intel spokesman Chuck Mulloy said Wednesday that the amnesty could spark a large infusion of capital into the U.S. economy and stimulate domestic spending by U.S. companies. Intel says it has deferred taxes on $6.3 billion of foreign income.
``This bill is a good deal,'' Mulloy said. ``We support it from a larger domestic economic stimulus point of view.'' If the bill passes both houses, Intel would have to evaluate how much cash to return to domestic accounts, he said.
HP, which has been one of the bill's most visible supporters, says it has accumulated $14.5 billion in foreign earnings and kept them outside the country, in part to avoid paying the U.S. corporate tax rate of 35 percent.
Eli Lilly, whose products include the anti-depressant Prozac, says it has $8 billion in untaxed overseas profits.
Lawmakers say the measure has a strong chance of becoming law. The Senate bill has support from most Republicans as well as some Democrats. In the House, the Republican chairman of the House Ways and Means Committee, Bill Thomas of California, has proposed a similar plan.
Despite their unhappiness about the bill, administration officials made it clear Wednesday that they would not try to veto the measure because they are more concerned about passing the broader legislative package.
The main purpose of the bill is to replace a tax break for U.S. exporters that has been declared an illegal subsidy by the World Trade Organization.
If the United States does not repeal the tax break, which allows American manufacturers to avoid taxes on exports by establishing off-shore sales corporations, the European Union has threatened to retaliate with $4 billion in tariffs on products from the United States.
10 percent break
The bill approved by the Senate Finance Committee would reduce the corporate tax rate on U.S. manufacturers by as much as 10 percent and offer some modest new permanent tax breaks for American companies operating overseas.
By far the most controversial of those measures is the proposed tax holiday on foreign profits, which supporters call the ``Homeland Reinvestment Act.''
The idea has tremendous allure to lawmakers because it offers the possibility of bringing at least a brief flood of money into the United States.
The Joint Committee on Taxation, the non-partisan congressional agency that calculates the effect of tax proposals on revenue, estimates that a six-month tax amnesty for overseas profits could bring back $135 billion. |
