The Honorable John Ensign
United States Senate
Washington, DC 20510

The Honorable Barbara Boxer
United States Senate
Washington, DC 20510

Dear Senators Ensign and Boxer:

Recent reports have indicated that the U.S. Senate may consider including a repatriation provision in tax legislation being considered next week. I would highly encourage you to use this option, as it’s a win-win for everyone involved.

The “American Jobs Creation Act of 2004” allowed companies to repatriate foreign earnings at a flat rate of 5.25% for 2005 only (under normal tax rules, companies would have to pay up to a 35 percent foreign and U.S. combined tax rate). The results were astounding. $312 billion was repatriated, resulting in nearly $18 billion in new corporate income tax revenue. The Joint Committee on Taxation predicted that less than $3 billion in new revenue would be generated during the repatriation year—a six-fold difference.

It’s important to note that most, if not all, of these foreign earnings would never have been repatriated and reinvested in the U.S. Rather than filling up pension balances, giving workers raises, and bolstering 401(k) and IRA balances, this $312 billion would be sitting in foreign bank accounts. They were a one-time shot-in-the arm to GDP of over 2.5%. Federal coffers saw tax dollars they otherwise would not have seen.

Once again, Congress has the opportunity to use repatriation to inject much-needed and non-inflationary capital into the United States. According to Decision Economics, $545 billion is sitting overseas today, ready to be repatriated. If even half of that money was returned to this country, it would represent a one-time boost equivalent to 2 percent of GDP. Hundreds of billions of dollars would be available to lend, pay down debt, restructure, and (most importantly from a taxpayer perspective) avoid any potential government bailouts.

Repatriation, though, should be the rule and not the exception. The United States is the only country in the world that tries to tax the worldwide income of its companies, and has set up complex deductions and credits as a result. A simple, territorial system similar to repatriation would be a pro-taxpayer and modern tax reform step.


Grover Norquist

View the PDF version of the letter.