Bringing the Money Back Home

The Hagan/McCain legislation falls short of its potential and should be rejected and replaced by a fairer, more equitable bill that truly begins to rebalance this country.
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The Repatriation Bill in Congress falls way short.

Corporations have been crying for big tax breaks to bring their profits from other countries home. They are currently sitting on over two trillion dollars in domestic profits hoarded over the last few years.

Senators', Kay Hagan, of North Carolina and, John McCain, of Arizona have introduced a new bill, The Foreign Earnings Repatriation Act , to allow multi-national corporations to bring over a trillion dollars in foreign profit back to the United States at a favorable tax rate. Too favorable!

The tax rate in the bill falls way short of what's fair.

Senator Hagan's legislation calls for a repatriation rate of 8.75%. The rate in the last repatriation bill was 5%. A corporation's 8.75% tax rate will be reduced to a paltry 5.75% if they create jobs here in the U.S.

There is also a clause that imposes penalties on corporations for failure to maintain employment levels if they've repatriated profits and received the additional 3% tax break for job creation, something that was not considered in the American Jobs Creation Act of 2004.

Though better in many ways than the 2004 bill, the new, slightly higher rate at 8.75%, is laughable and grossly unfair to the American taxpayer. Even those in the lowest tax bracket pay as much or more Federal Income Tax as the Senators' from North Carolina and Arizona are asking corporations to pay.

By contrast, under the new law corporations that add jobs will be paying an effective tax rate of 5.75% on over a trillion dollars profit.

Right-wing congressional members constantly bemoan U.S. corporations' high marginal tax rate of 35%, proclaiming it is the second highest tax rate in the world and hurts American competitiveness globally. But that is political hyperbole -- political bullshit.

No corporation in America pays 35%, or even near that.

In fact, corporations, with the help of a complicit and bought Congress, paid an average of 12.1% of their domestic profit in taxes for 2011 thanks to tax breaks and loopholes -- far short of their patriotic share of the burden.

Which brings us back to repatriating foreign profits.

Despite the higher rate -- 3.75% more than in 2004 -- Senator Hagan's bill lets corporations off the hook for their fair share of the tax burden.

At 8.75% there is little incentive for corporations to create jobs. Even the 3% incentive is no 'real' incentive.

If corporations returned all of the trillion dollars in foreign profits currently captured overseas at the top rate, the Foreign Earnings Reinvestment Act (S.1671) will net a mere $90 billion in tax receipts paid to the Federal Government. That would be reduced to less than $60 billion if all eligible multi-national corporations created jobs. We would, hopefully, offset the 33% revenue loss with the growth jobs would create for the economy.

The $90 billion sounds like a lot until compared with the $350 billion the current law -- at 35 percent -- would generate. That would reduce the 2012 deficit by nearly one-third, and corporations would be doing their fair share of helping, not only the deficit, but the economy. But, corporations have indicated that they will not repatriate profits at that rate.

Protesting the unfairness of a 35% tax rate to repatriate foreign profits is far more compelling and more justified than complaining about our domestic corporate tax rate. Thirty-five percent does seem punitive and that is a legitimate argument. Surely there is a more equitable level that would be acceptable to all parties; truly reduce the deficit, increase jobs in the United States, and allow U.S. corporations to remain globally competitive?

In an article last July, "UnAmerican Activities: Repatriation 101," I proposed a fair agreement that would give control to the government rather than to the corporations as the 2004 act did. In the proposal the government would collect and hold an initial 28% and return a substantial benefit -- a tax credit -- for job creation.

In 2004 American corporations promised to create jobs in the U.S. if allowed to bring over $300 billion back at a 5% tax rate. Corporations proved to be untrustworthy, buying back shares, giving dividends to investors and bonuses to executives, while shedding thousands of jobs rather than creating them.

As a result of their actions repatriation this time around becomes a matter of greed and honor, a struggle between trust and regulation. Corporations hide behind the veil of serving their investors and investors, historically, choose greed over country. They, as owners of corporations, advocate taking everything this country has to offer yet show a reluctance to give back.

Congress' ability to regulate then becomes the counterbalance to greed -- the protection of 'the people' against corporatocracy.

Any repatriation law must consider the empirical evidence when negotiating any agreement with corporations. Corporations, unlike people, have no moral compass.

We are again at a juncture where government can do the right thing for the country and taxpayers -- the opportunity to correct one of the big failures of the past.

The Hagan/McCain legislation falls short of its potential and should be rejected and replaced by a fairer, more equitable bill that truly begins to rebalance this country.

It's important to let congressional members know, especially the 11 co-sponsors, that the Foreign Earnings Reinvestment Act is currently unacceptable. This indebted country cannot afford another gift to corporations at the expense of taxpayers.

Taxpayers are tired of being constantly crushed by corporations and their congressional surrogates.

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