Dodging Repatriation Tax Lets Companies Bring Home Cash

[ProSense]

Dodging Repatriation Tax Lets Companies Bring Home Cash

By Jesse Drucker

At the White House on Dec. 15, business executives asked President Obama for a tax holiday that would help them tap more than $1 trillion of offshore earnings, much of it sitting in island tax havens.

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Such maneuvers reflect a decades-long cat-and-mouse game. As regulators and lawmakers tighten the rules, companies seek new, legal methods for getting around them. One of the techniques the KPMG advisers discussed was in response to loophole-closers Congress passed in August to address a projected $1.4 trillion federal budget deficit. The changes will make it harder for companies to manipulate the credits they get for taxes paid overseas.

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Chambers, Cisco’s chief executive officer, brought up a repatriation break during the White House meeting, according to a person familiar with the discussion. It could reprise a 2004 tax holiday that allowed multinationals to return profits to the U.S. at a tax rate of 5.25 percent. U.S. corporations brought home $362 billion, with $312 billion qualifying for the relief, according to the Internal Revenue Service.

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The argument that a new tax break for offshore earnings would generate a domestic stimulus “holds no water at all,” said Joel B. Slemrod, an economics professor at the University of Michigan’s school of business and former senior tax economist for President Reagan’s Council of Economic Advisers. U.S. companies are already sitting on a record pile of cash -- $1.9 trillion in liquid assets, according to Federal Reserve data.

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Those are the key points and the Obama administration and Congress need to stick to their guns.

[mtnsnake]

1. Yeah, they need to stick to their guns, just like they did on not extending tax cuts for the rich

[ProSense]

2. Maybe they'll compromise

One suggestion is that they offer amnesty to bring the money home, and then the administration can impose stricter regulations.

Also, the Congressional Democratic caucus is not a monolithic progressive bloc so anything can happen. The fact that they passed legislation to close the loopholes is a good sign.

We'll see.