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To: Ahda who wrote (28)	4/10/2003 10:43:18 AM
From: Ahda	Read Replies (1) \| Respond to of 594

Posted on Mon, Apr. 07, 2003 Tech seeks tax relief on offshore profit ONE-YEAR BREAK PROPOSED TO BE PART OF BUSH PLAN By Heather Fleming Phillips Mercury News Washington Bureau WASHINGTON - Silicon Valley companies are lobbying to get a piece of the tax-cut pie that's being divvied up in Congress over the next several weeks: They're pushing for a one-year tax break on profits earned offshore. Tech companies are backing three similar bills introduced in Congress that would temporarily slash the tax rate on overseas profits sent back to U.S. parent companies. The bills would cut the rate from 35 percent to 5.25 percent for one year. Lobbyists admit that tech faces an uphill battle in winning the approval of Congress. Still, Hewlett-Packard, Intel, Sun Microsystems and others are pitching the plan as a partial answer to the industry's economic woes, arguing that the temporary tax cut would spur American companies to bring $135 billion back into the United States in a year. They say it would give the sagging U.S. economy an immediate shot in the arm, as companies use the money to make capital expenditures, hire new workers, and beef up research and development. ``It will have a huge stimulative effect,'' said Hewlett-Packard's top Washington lobbyist, John Hassell. ``It's probably one of the most important things Congress can do'' right now to help the tech industry, he said. Under current tax laws, profits earned overseas that are paid back to the parent company as a dividend are taxed at 35 percent. Tech companies say the rate is prohibitively high and discourages companies from bringing their profits back to the United States. Because many tech companies have a global presence, the tax rate has a significant impact on the industry. For instance, Hewlett-Packard reports that 65 percent of its revenue comes from overseas. The company currently reinvests its profits back into its plants in Dublin, Ireland; Singapore and other foreign locations. An Intel spokesman said 70 percent of its sales are in foreign countries. Intel has major operations in Ireland, Israel, Shanghai and Malaysia. Congress' Joint Committee on Taxation has estimated that the tax cut on overseas profits would increase revenue to the U.S. Treasury by more than $4 billion in the first year. Global pharmaceutical giants such as Eli Lilly and Wyeth joined the tech industry to form a lobbying coalition -- the Homeland Investment Coalition -- to push for a break on the tax rate on foreign profits. The group sent a letter last month to Rep. Bill Thomas, R-Bakersfield, who chairs the tax-writing House Ways and Means Committee, urging him to include the issue as part of a broader economic stimulus package offered by President Bush. ``It's hard to imagine how it wouldn't give a big boost in an economy that needs it right now,'' said Caroline Graves Hurley, AEA's Director of Tax Policy. Yet passage by Congress is uncertain at best. A key reason is that such a measure is not currently part of the president's economic stimulus package, and it will be competing against other industries that are pushing to get their own pet projects included in the final economic stimulus legislation. Another obstacle is the Joint Committee on Taxation has estimated that the temporary tax break would have a ripple effect, resulting in $4 billion less paid to the treasury over 10 years. That reduction in revenue would have to be offset by increased revenue somewhere else. Proponents dispute that it would have any negative long-term impact on the treasury since companies would leave most of their profits offshore away from the hands of the U.S. government if they don't get the temporary tax relief. Thomas has asked the Joint Committee to re-evaluate the issue. -------------------------------------------------------------------------------- Within any economic structure there are certain companies who will beat all odds at any given time and take a road that will lead to success. The cost for housing both business and people here in So CA I feel are too high. We are a major port as well as a tech area and increased costs here contribute to escalating costs across the nation. Controlled inflation creates a healthy economy but when housing costs across the nation are spiraling well beyond the rate of inflation cost begins to outstrip profits and growth will occur where profits can be made. Refinancing has been a very strong market that contributes to the economy. The tax laws are set up for pro housing but a healthy economy requires continued supply of new buyers into the market place. The mortgage industry is stating a huge percentage of their activity is from existing home owners. Dollar wise in CA property values are creating costs far to great for business to absorb. This type of inflation will affect the rest of the economy. The adjustment of the boom and the readjustment during the bust has to do with debt ratio which to me is excessive in the housing industry. I think AG is concerned too.