Wednesday, October 5, 2011

UPDATED_Heritage(!): "Repatriation Tax Holiday Wouldn’t Create Jobs" (GOOG; GE; CSCO)

Update: Follow-up: "More on Repatriation--WIN America corporatist lobbying group's strike back on Heritage"
Original post:
From Real Time Economics:
Giving U.S. companies a tax break for bringing home profits held overseas likely won’t create more jobs or spur domestic investment, an influential conservative think tank will argue in a report to be released Tuesday.
In a break from many Republican lawmakers and a host of major U.S. companies including Google Inc., Apple Inc., Pfizer Inc. and Microsoft Corp., the Heritage Foundation said in a new study that a repatriation tax holiday would not motivate companies to hire new workers.

The report from the conservative think tank, often aligned with House Republicans, could slow recent momentum for a repatriation tax holiday, under which U.S. multinationals would bring home profits held abroad at a lower tax rate. Congress previously passed a repatriation tax break in 2004, billed as a one-time remedy, but lawmakers from both parties, eager to bring down the unemployment rate, have suggested repeating the effort.

Rep. Kevin Brady (R., Texas) introduced a bill in May that would tax overseas corporate profits brought back to the United States at a roughly 5% rate, rather than the top corporate rate of 35%.
While the tax break would likely prompt companies to bring home overseas profits, those companies wouldn’t use the extra cash to hire workers, launch mergers or make other new investments they wouldn’t already undertake, argue senior fellow J.D. Foster and senior policy analyst Curtis Dubay.

The companies that would benefit from a repatriation tax holiday aren’t currently squeezed for capital, so an influx of funds won’t alone be motivation enough to create new jobs, the pair write. “The repatriation holiday would have little or no effect on investment and job creation, the key to the whole issue, simply because the repatriating companies are not capital-constrained today.”...MORE
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