It’s time for another repatriation holiday

Photo of Grover Norquist
Grover Norquist
President, Americans for Tax Reform
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      Grover Norquist

      Mr. Norquist, a native of Massachusetts, has been one of Washington's most effective issues management strategists for over two decades.

      Mr. Norquist is president of <a href="http://www.atr.org/">Americans for Tax Reform (ATR)</a>, a coalition of taxpayer groups, individuals and businesses opposed to higher taxes at the federal, state and local levels. ATR organizes the TAXPAYER PROTECTION PLEDGE, which asks all candidates for federal and state office to commit themselves in writing to oppose all tax increases. To date, 172 House members, and 34 Senators have taken the pledge. On the state level, 7 governors and over 1100 state legislators have taken the pledge.

      Mr. Norquist also:

      * Serves on the board of directors of the National Rifle Association of America.
      * Serves on the board of directors of the American Conservative Union.
      * Serves as a Contributing Editor to the American Spectator Magazine.
      * Serves as president of the American Society of Competitiveness.
      * Authored the book Leave Us Alone: Getting the Government's Hands Off Our Money, Our Guns, Our Lives

      In the past, Mr. Norquist served as:

      * A commissioner on the Advisory Commission on Electronic Commerce.
      * A commissioner on the National Commission on Restructuring the Internal Revenue Service.
      * Economist and chief speech-writer, U.S. Chamber of Commerce (1983-1984).
      * Campaign staff on the 1988, 1992, 1996 Republican Platform Committees.
      * Executive director of the National Taxpayers’ Union.
      * Executive director of the College Republicans.

      In the words of Newt Gingrich, Grover Norquist is "the person who I regard as the most innovative, creative, courageous and entrepreneurial leader of the anti-tax efforts and of conservative grassroots activism in America . . . He has truly made a difference and truly changed American history."

      P.J. O'Rourke says, "Grover Norquist is Tom Paine crossed with Lee Atwater plus just a soupcon of Madame Defarge."

      Arianna Huffington calls Norquist "The dark wizard of the Right's anti-tax cult"

      Mr. Norquist holds a Masters of Business Administration and a Bachelor of Arts degree in Economics, both from Harvard University. He lives in Washington, DC with his wife, Samah and his daughters, Grace, and Giselle.

It has become clear that this Congress is not going to be one that passes fundamental tax reform. Anything that would pass the Democrat Senate or be acceptable to President Obama would be a net tax increase, and that is unacceptable to the House of Representatives and their 237 Taxpayer Protection Pledge signers. Attempts thus far at tax reform — the Simpson-Bowles commission and “Gang of Six” efforts come to mind — have been tax increases disguised as rate-cutting tax reform. Nevertheless, that does not mean that a significant opportunity isn’t there on an aspect of fundamental tax reform — namely, doing another round of low-tax repatriation of foreign corporate profits.

Back in 2004, Congress passed a bill that allowed corporations to bring back to the United States after-tax dollars earned in other countries relatively tax-free. Rather than having to pay the IRS the difference between the foreign country’s tax rate and our own 35 percent rate (the highest in the developed world), companies choosing to bring profits back to the United States would only have to pay the IRS a maximum tax rate of 5.25%.

This “repatriation holiday” was in effect for all of 2005. The result was that at least $320 billion of money was brought back to the United States. This increased corporate tax revenue by nearly $17 billion — tax revenue that otherwise would have been indefinitely deferred into the future. The money was used to fund pension plans, raise wages, create jobs, and invest in new plants and equipment.

Today, multiple press reports indicate that over $1 trillion is sitting overseas right now, waiting for similar or better tax treatment to come home. If even half this money was repatriated (about the same ratio as happened in 2005), that implies another repatriation round would yield the United States over $500 billion of new capital — almost literally out of the sky.

Protectionists and those who think all foreign economic activity is somehow suspect should be in favor of this. We can sell products and services to foreigners, and not even let their countries benefit by having the profits parked in their banks. We’d bring that money right back here to the United States. Liberals should like it for the same reason (even Andy Stern, former head of the SEIU, is for repatriation). Inflation hawks should like this because it is capital without the Federal Reserve having to print any more money. Unions should like this because it’s a ready source of funding pension plan obligations. Investors should like this because it will immediately free up other capital for dividends and should raise stock prices on an after-tax basis. Put simply, it’s a win-win.

The money would be used for similar purposes as it was in 2005, with the added benefit of being able to pay down some of the bad debt that the financial crisis forced onto corporate balance sheets. Jobs would be created, wages and benefits would rise, and there would be less pressure to raise prices on goods and services.

Why would the same Democrat senators and Democrat president who oppose fundamental tax reform go for this idea? The answer can be found in the December 2010 deal on not raising tax rates. As part of that deal, President Obama (not Congressional Republicans) insisted on including a year of full business expensing of capital equipment (in lieu of depreciation). This is a thoroughly supply-side idea, one that the Right has been pushing since the 1970s. Obama insisted on it for nationalist, Keynesian, industrial planning reasons — he wanted a surge of fixed business investment in the lead-up to his re-election bid. He can be for another round of repatriation for the same reason: “Large multi-national companies should bring that money home here to (insert campaign stop), to create jobs for American workers. That’s why I insisted on a repatriation opportunity for America’s large employers.” You don’t need everyone pushing the cart in the right direction to have the same motivation for doing so, provided the cart gets to where you all agree it should get to.

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  • California7

    Interesting. Seems like a great idea — I don’t know why more politicos aren’t talking about it.

  • eliminatecit

    Agree that this is very low hanging fruit that Washington DC could pick to jump start the economy. The $1 trillion plus in foreign bank accounts will only sit overseas and never help job creation in the US. Corporations like Cisco and Oracle have been vocal that they are ready to spend it if they could return it to the US. Instead it will sit overseas helping to finance foreign governments and corporate job creations in other economies.