Devil’s bargain or good idea?
The New York Times reports that some of the nation’s largest corporations have amassed vast profits outside the country and are pressing Congress and the Obama administration for a tax break to bring the money home.
Apple has $12 billion waiting offshore, Google has $17 billion and Microsoft, $29 billion, the Times writes.
Under the proposal, known as a repatriation holiday, the federal income tax owed on such profits returned to the United States would fall to 5.25 percent for one year, from 35 percent, the Times reports.
In the short term, the Times writes, the measure could generate tens of billions in tax revenues as companies transfer money that would otherwise remain abroad — and it could help ease the huge budget deficit.
Corporations and their lobbyists say the tax break could boost the weak recovery by inducing multinational corporations to inject $1 trillion or more into the economy, the Times reports. They promoted the proposal as “the next stimulus” at a conference last week in Washington.
“For every billion dollars that we invest, that creates 15,000 to 20,000 jobs either directly or indirectly,” Jim Rogers, the chief of Duke Energy, said at the conference. Duke has $1.3 billion in profits overseas, the Times reports.
But that’s not how it worked last time, the Times writes. Congress and the Bush administration offered companies a similar tax incentive in 2005. Although the tax break lured 800 companies into bringing $312 billion back to the United States, 92 percent of that money was returned to shareholders in the form of dividends and stock buybacks, the Times reported, city a study by the nonpartisan National Bureau of Economic Research.
What do you think?
Is this the time to cut corporate taxes to induce more job creation? Or is the measure likely to benefit those who don’t need help while bypassing those who do?
- Henry Unger, The Biz Beat
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