On Wednesday the Obama administration came down firmly against giving corporations a repatriation tax holiday – a tax break to corporations for bringing back into the United States profits they stashed overseas to avoid taxation.
That should be a fatal blow to a really bad idea. The Center for Budget and Policy Priorities released a paper today explaining why, with a title that pretty much says it all: "Repatriation Tax Holiday Would Lose Revenue And Is a Proven Policy Failure."
Yet, just as outgoing White House press spokesman Jay Carney was making the White House opposition to repatriation clear in his last appearance as press secretary, Rep. John Delaney (D-Md.) began airing ads for his reelection campaign touting support for repatriation.
Delaney has been a leading proponent of giving a "tax holiday" to corporations who have used fancy strategies to keep their profits out of the reach of U.S. taxation – such as the proposed corporate merger that Richard Eskow writes about today that is designed to allow the merged entity to recast itself as an Irish-based company that can more easily deploy its overseas cash without having it taxed by the U.S. Delaney's legislation, which he is touting in his ads, would allow corporations to bring back money they have stashed overseas back into the United States tax-free if they use a portion of that money to buy "infrastructure bonds" that would be used to fund transportation projects.
The Delaney bill is being sold as a bipartisan solution to a financial crisis created by partisan deadlock and legislative cowardice: the possible drying-up within the next two months of the Highway Trust Fund, which funds highway and public transportation projects.
Congress has been resistant to raising the gasoline tax that is deposited into the trust fund, and there hasn't been political momentum yet for alternate funding ideas. In the absence of ideas that might take more political moxie to sell, Delaney's proposal appeals to lawmakers looking to offer what looks like a free lunch: billions worth of new infrastructure projects without additional federal spending and without a tax increase.
Except that it's not free.
The CBPP analysis said that a "rudimentary estimate" of the federal revenue lost from the Delaney proposal would range between $70 billion and $105 billion over 10 years – far more than the $50 billion in bonds the legislation anticipates selling to corporations. But the impact on the federal deficit could be even worse, the paper said, because Delaney's bill "would encourage multinationals to shift more profits overseas in anticipation of more tax holidays in the future, thus making the potential long-term revenue loss greater."
There is no need to reward corporate tax-dodgers in order to establish an infrastructure bank. The Build America Bonds program that was part of the 2009 Recovery Act supported more than $181 billion of financing for new public capital infrastructure projects, attracting investors looking for tax-free returns and helping state and local governments cut their borrowing costs. A new infrastructure bank program, such as one long championed by Rep. Rosa DeLauro (D-Conn.), would encourage corporations and other private investors to invest in public projects without creating perverse incentives to corporations to continue the tax evasion that we should instead be working to end.
That's just one of several alternative proposals to pay for our infrastructure needs. We ought to be amping up the debate on those proposals. In the meantime, we need to recognize that the repatriation-for-infrastructure idea is a zombie that won't die easily. The statement from the White House Tuesday is one nail in the coffin. It appears we will need quite a few more.