House Majority Leader Eric Cantors proposal to allow companies to bring foreign-based income back into the United States at a reduced tax rate puts him at odds with the Obama administration on the issue.
In a Monday speech, the Virginia Republican called for reducing the top corporate tax rate to 25 percent as part of a broad overhaul of the tax code.
Forging consensus on this type of fundamental tax reform will take some time, and that’s why I propose allowing U.S. multinational companies to bring back nearly $1.2 trillion in overseas profits so that they can invest that money here at home, Cantor said at the Hoover Institution in California.
That sort of move has been supported by companies like Apple and Cisco, and also by Sen. Barbara Boxer (D-Calif.), who represents some of the technology companies pushing for a so-called repatriation holiday.
But Treasury Secretary Timothy Geithner has signaled in multiple forums that the administration would only deal with repatriation as part of a broader discussion to overhaul the corporate tax code.
Repatriation we would be happy to consider in the context of overall corporate reform, Geithner told the Senate Finance Committee in February. If we can do corporate reform right, we’ll have a chance to help on that front, but would not support it outside the context of comprehensive reform.
Cantor also signaled to reporters last month that he favored allowing overseas profits to be returned to the United States at a lower tax rate. His call for a lower corporate tax rate came days after Rep. Dave Camp (R-Mich.), the chairman of the House Ways and Means Committee, said he wanted to lower both the top corporate and individual rates to 25 percent.
In the middle of the last decade, corporations were allowed to bring profits back to the United States at the reduced rate of 5.25 percent. The current top marginal corporate tax rate is 35 percent.
Proponents of such a plan say it helps spark job creation here, but skeptics have doubted the stimulative effect of the measure.
Rep. Brian Bilbray (R-Calif.) this month introduced a tax holiday measure that would allow funds to be brought back at a 0.0 percent rate if they are used to help a corporation expand or invested in research and development and new manufacturing. It also establishes a 5.25 percent rate if profits are returned to the United States for other reasons.
Sen. Orrin Hatch (R-Utah), the ranking member of the Senate Finance Committee, has also expressed some skepticism about the idea of a repatriation holiday.
Probably from an accounting and tax standpoint, thats not a good way to go, Hatch said at an event several weeks ago. But we did it once before, and it could be done under certain circumstances.