A business group that has taken some positions popular among liberals has come out against a corporate tax holiday for offshore profits, saying U.S. multinationals already have too much incentive to ship jobs abroad.
Business for Shared Prosperity and a coalition of other groups, some of them representing small businesses, also called a previous holiday — which allowed corporations to bring profits into the U.S. at a drastically reduced tax rate — a failure.
“When powerful large U.S. corporations avoid their fair share of taxes, they undermine U.S. competitiveness, contribute to the national debt and shift more of the tax burden to domestic businesses, especially small businesses that create most of the new jobs,” the groups said in a letter, dated Tuesday, to lawmakers.
Business for Shared Prosperity has also come out in recent weeks against continuing the Bush tax cuts for wealthy earners and has said that a reform of the tax code should create revenue to reduce deficits.
Bob Keener, a spokesman for the group, told The Hill over e-mail that Business for Shared Prosperity did not have a formal membership, but that over 800 businessmen and women from around the country had signed its petitionagainst tax havens.
A bipartisan group of lawmakers — including Reps. Kevin Brady (R-Texas), a senior House Ways and Means member, and Jim Matheson (D-Utah) — is pushing legislation that would create a holiday similar to the one enacted in 2004, which allowed corporations to repatriate profits at a 5.25 percent rate. The current top corporate rate is 35 percent.
Advocates for a new holiday — which also include the Win America Campaign, a coalition that includes Apple, Google and other top multinationals — say it could help stimulate the economy by bringing more of the roughly $1 trillion American companies have abroad into the U.S.
In a statement, the Win America Campaign said the groups’ letter had missed the boat. “Make no mistake, our outdated policies hurt workers and businesses alike and that’s why this effort to bring the money home has drawn together supporters of every political stripe,” the coalition said.
The advocates, who also include Rep. Eric Cantor (R-Va.), the House majority leader, have essentially also said a repatriation holiday could be a sort of bridge to comprehensive tax reform, a process many Washington officials say is both important and time-consuming.
Third Way, the centrist Democratic think tank, is set to have a Wednesday event on the idea as well, featuring Sen. Kay Hagan (D-N.C.), Rep. Jared Polis (D-Colo.), Rep. Loretta Sanchez (D-Calif.) and Andy Stern, the former President of the Service Employees International Union.
Opponents of a new holiday are skeptical the previous one helped create jobs and say it could encourage companies to keep more money overseas by conditioning them to expect more holidays.
Rep. Lloyd Doggett (D-Texas), also a Ways and Means member, also requested a Joint Committee on Taxation examinationof two generic tax holidays, one of which the nonpartisan committee said would cost $79 billion over a decade.
For its part, the Obama administration has also said it will only look at repatriation in the broader tax reform discussion, a stance that Rep. Dave Camp (R-Mich.), the chairman of the House Ways and Means Committee, has hinted he shares.
In their letter, the groups cited recent Businessweek reporting that showed how corporations like Forest Laboratories and Google lower their tax bills by routing profits to low- or no-tax countries like Bermuda.
“We need to stop this irresponsible tax avoidance, which undermines the U.S. economy, and assure that all businesses play by the same tax rules,” the group writes.
The coalition also said it is against the U.S. switching to a so-called territorial tax system, in which corporations would essentially only be taxed on profits made within American borders. As it stands, U.S. corporations can basically defer paying American taxes until they try to repatriate them to the U.S.
Republicans are pushing for a move toward a territorial system, which is used in many other industrialized countries. But opponents say it would encourage corporations to employ more tax avoidance strategies.