Tax committee chairman Thomas (R) would reduce corporate taxes and ease repatriation of overseas profits.
WASHINGTON – House Ways and Means Committee Chairman Bill Thomas (R-Calif.) has proposed legislation that would reduce tax business and corporate taxes by 3%. The proposal is part of a larger bill that will repeal provisions of corporate taxation that were deemed illegal in a recent ruling by the World Trade Organization (WTO).
The broader bill, H.R. 2896, allows corporate profits earned by American companies overseas to be repatriated into the United States at a 7% percent rate, down from the current 35% rate. This gives U.S. companies a greater incentive to invest foreign profits inside American borders, rather than keep the money offshore to the detriment of the American economy.
A similar bill, H.R. 767 has been proposed by Representative Phil English (R-Penn) and stipulates a 5.25% repatriation rate for foreign profits.
"If cutting business taxes to 7% is good, 5.25% is even better," said taxpayers advocate Grover Norquist, who heads Americans for Tax Reform (ATR) in Washington. "The current 35% penalty is very prohibitive and has caused many American companies to leave their earnings overseas where Americans and other American businesses cannot benefit. The more money that American companies overseas choose to reinvest in America, the more jobs that will be created at home and the greater the economic growth that will result."
H.R. 767 not only stipulates a reduced tax rate compared with H.R. 2896, but also allows companies to repatriate any and all overseas assets, not just those assets that companies have designated as permanently overseas. This greater flexibility will give a valuable incentive to corporations to transfer cash back into the United States where businesses, recovering from the recession, could really use the money.
"According to the Bank of America, reducing the repatriation tax rate on corporate earnings to 5.25% will cause businesses to pump $400 billion dollars into the American economy that would otherwise stay offshore," continued Norquist. "This will complement President Bush\’s tax relief signed earlier this year, and give the economy a second shot in the arm. Let the healing continue."