Google Joins Apple, Cisco in Lobbying for Repatriation Holiday
Apple (NASDAQ:AAPL), Google (NASDAQ:GOOG), and Cisco Systems (NYSE:CSC) are pressing for a tax holiday on more than $1 trillion in offshore profits, with Jeffrey Forbes, former chief of staff to Max Baucus, chairman of the tax-writing Senate Finance Committee, lobbying on their behalf.
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In total, the trio have an army for more than 160 lobbyists, including at least 60 who once worked for a sitting member of the House or Senate, pushing for a repatriation holiday, which would amount to a $78.7 billion tax break, spread out over the next decade. Last time such a tax break was tried, in 2004, repatriation resulted in little hiring or domestic investment — most of the money was used to buy back stock, ultimately benefiting a narrow set of shareholders.
“This is an issue that involves a whole lot of people hired by corporations that are pushing for those corporate interests rather than the public interest,” said James A. Thurber, director of the Center for Congressional and Presidential Studies at American University in Washington.
However, lobbyists are arguing that the cash will help boost the economy, and support for the tax holiday is growing in Congress. Advocates of the tax holiday say it would bring more than $1 trillion to the U.S. now held overseas. “It would do much to regenerate the economy,” said Robert Livingston, a former Republican chairman of the House Appropriations Committee who is now lobbying for Oracle. “A total of $1.5 trillion from all affected U.S. companies would go a long way to pull us out of the doldrums.”
Despite support on both sides of the aisle in Congress, the Obama administration remains opposed to a stand-alone tax holiday for repatriated profits, citing the 2004 experience. Without a repatriation holiday, companies returning overseas earnings to the U.S. are taxed at the top corporate rate of 35%, with credits for foreign income taxes paid. U.S. multinational companies have an estimated $1.375 trillion in overseas profits on which they have paid no federal income tax.
Apple, Google, and Cisco are pushing for a tax holiday that would allow them to bring home overseas earnings at a low tax rate of just 5.25%. In 2004, companies repatriated $312 billion to the U.S. as part of that tax holiday, using it mostly for stock repurchases rather than direct hiring or investment.
The tax holiday would most benefit those companies that have parked profits in tax havens like Bermuda, the Cayman Islands, and Switzerland. “A lot of what companies report as foreign profit is really U.S. profit that should be subject to U.S. tax,”said Martin Sullivan, a former Treasury Department economist. “Those earnings didn’t get overseas by accident. Many of these companies intentionally put them there to avoid paying U.S. taxes.”