The progressive think tank NDN is questioning analysis from the congressional Joint Committee on Taxation (JCT) concluding that a repatriation “tax holiday” would cost the U.S. about $80 billion in the next decade.
The proposed tax holiday would allow multinational companies to bring offshore profits back to the U.S. at a much lower tax rate. NDN, going against conventional progressive wisdom, argues in its new report that a repatriation holiday would create close to $9 billion in revenue.
The office of House Majority Leader Eric Cantor even blasted out news of the NDN report, while pointing out that the holiday is part of the House Republicans’ Plan for America’s Job Creators.
JCT released its report in May at the request of Democratic Rep. Lloyd Doggett of Texas. But NDN argues now that the “JCT’s approach has been flawed conceptually and its estimates of significant revenue losses are incorrect.”
Proponents of the tax holiday argue it would spur job creation and growth. Opponents, however, have seized the JCT report as evidence, along with the 2004 tax holiday to argue it is largely ineffective.
In 2004, multinationals were allowed to repatriate offshore profits at a 5.24 percent tax rate — significantly lower than the standard 35 percent. According to the Internal Revenue Service (IRS), the 2004 holiday brought in almost $362 billion. Other studies, however, said it did not create the promised domestic investment or employment. (CBO report: Higher taxes, lower spending projected to reduce deficit)
President Obama has, in the past, ruled out the holiday. But as he heads into the fall with a weak economy and the 2012 election just around the corner, there is speculation he will relent and discuss the idea as a Hail-Mary effort to spur job creation and regain favor in the eyes of corporations.
Rep. Kevin Brady of Texas has already authored a repatriation tax holiday bill that has the support of 15 Republicans and eight Democrats in the House. No Senate bill has been produced yet.