ATR President Grover Norquist today sent the following letter to House Ways and Means Committee Chairman Dave Camp (R-Mich.):
I write today to urge you and the Ways and Means Committee to consider another round of “repatriation” of deferred foreign corporate earnings.
Under current law, companies wishing to return foreign earnings back to the United States must pay the difference between the foreign income tax paid and the U.S. corporate income tax rate. At 35 percent (plus states), that rate is the highest in the world. As a result, today there is over $1 trillion in deferred foreign earnings sitting in overseas bank accounts. That’s money unavailable to bring home to create jobs, bolster wages and benefits, pay down debt, and increase shareholder value.
Back in 2005, Congress permitted companies to repatriate foreign earnings at a maximum international double taxation effective rate of only 5.25%. As a result, over $320 billion was repatriated that year, generating a one-time corporate income tax revenue windfall of nearly $17 billion. Given the figures today, a similar approach could be expected to return $500 billion and yield a corporate tax revenue windfall of over $26 billion.
This is one of the few major pieces of comprehensive tax reform that can be accomplished this year. It’s unlikely that broad-based reform is in the cards for this Congress. But repatriation can and must happen. There is hope with the recent precedent of full business expensing. As part of the tax hike avoidance bill of December 2010, President Obama (not Congressional Republicans) asked for and received a year of full business expensing in lieu of asset depreciation. This key component of fundamental tax reform has been a supply side policy goal for two generations, and should be made a permanent part of the tax code.
The point is that big reforms are possible with a Democrat Senate and a Democrat White House. Bringing hundreds of billions of dollars of capital back to the United States at no cost (indeed, the opposite of cost) to the Treasury is one of those reforms. Congress should learn from its recent success and adopt repatriation (ideally, on a permanent basis) as the bipartisan solution to international corporate tax reform.