McCain, Hagan Repatriation Tax Holiday Bill

McCain, Hagan Repatriation Tax Holiday Bill

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WebCPA reports that Senators John McCain, R-Ariz., and Kay Hagan, D-N.C., introduced legislation Thursday allowing multinational corporations to repatriate their foreign earnings at a reduced tax rate:

The bipartisan bill, known as the Foreign Earnings Reinvestment Act, aims to trigger the flow of $1 trillion from the foreign subsidiaries of U.S.-based multinationals at a reduced tax rate of 8.75 percent, as opposed to the statutory corporate income tax rate of up to 35 percent. It would accomplish this through a temporary dividends received reduction of 75 percent.

As an incentive to create jobs, the bill would allow companies to further lower the tax rate they pay to 5.25 percent if they grow their domestic pay roll during 2012. In addition, the bill discourages companies from cutting jobs by including in a company’s gross income calculation $75,000 for each full-time position they eliminated.

“While Americans struggle with crushing unemployment and a dismal economy, Congress has the responsibility to come together with solutions to get our nation back on track,” McCain said in a statement. “I am proud to join Senator Hagan in introducing the Foreign Earnings Reinvestment Act. This common-sense legislation will drive up to $1.4 trillion currently parked overseas back here to the United States, boosting our economy when we need it most.”

Tax law professor and blogger Linda Beale thinks it’s not only a bad idea, but possibly a corrupt one.

About Peter Pappas

Peter is a tax attorney and certified public acccountant with over 20 years experience helping taxpayers resolve their IRS and state tax problems.

He has represented thousands of taxpayers who have been experiencing difficulty dealing with the Internal Revenue Service or State tax officials.

He is a member of the American Association of Attorney-Certified Public Accountants, the Florida Bar Association and The Florida Institute of Certified Public Accountants and is admitted to practice before the United States Tax Court, the United States Supreme Court, U.S. District Courts - Middle District of Florida

Comments

  1. I’m on Professor Beale’s side of the fence, although I don’t share her sense of outrage.

    As I discussed in June, Andy Stern, former SEIU President and a national Democratic leader, also supports a repatriation holiday. I don’t know how Professor Beale would square his support with her world view. I’m guessing that she’d chalk it up to “brainwashing of the gullible by the uber-rich and their legions of lobbyists.” Something along those lines.

    http://taxdidactic.blogspot.com/2011/06/repatriation-holiday-part-ii-horror.html

    All that said, I believe Professor Beale raises several valid points from a tax policy perspective. My biggest problem with another repatriation holiday is that it distracts from fundamental tax reform. Let’s wrap international tax reform into a fundamental solution that includes broader corporate tax reform and individual tax reform.

    I don’t fault the multinationals (Cisco, Microsoft, Google, Pfizer) for lobbying — they believe that a repatriation holiday would be good for stakeholders. But a few multinationals shouldn’t drive U.S. tax policy. More broadly, no special interest group should drive U.S. policy in any given context.

  2. Knox, Linda might be right, but nothing is ever a certainty. This could be the one time these corporations use the repatriated moneys to pay dividends and increase the salaries of key employees.

    Maybe you’re right about the distraction from individual tax reform, but I think now job creation trumps tax reform.