A study commissioned in support of proposed tax-holiday legislation disputes recent estimates on how much an HIA 2.0 would cost.
Chalk another one up for the pro-repatriation crowd. A new study undercuts claims by the Congressional Joint Committee on Taxation that the first tax holiday of 2004 was a failure.
The study, by Quantria Strategies, was conducted in support of proposed bill S. 1671, which was introduced in early October by Senators Kay Hagan (D, NC) and John McCain (R, AZ) along with a very bi-partisan assortment of senators including Barbara Boxer (D, CA) and Joe Manchin (D, WV). That bill would modify current Internal Revenue Service law to allow a temporary reduced tax rate of 8.75 percent for foreign earnings of US corporations repatriated to the United States.
Ultimately, the study, using the same methodology of the JCT used in its report of early 2011, finds that a temporary tax holiday would cost taxpayers only $9.7bn over 10 years vs. the $78.7bn the JCT said it would cost in its report. Perhaps confusing the issue, an August study, “The Revenue Implications of Temporary Tax Relief for Repatriated Foreign Earnings: An Analysis of the Joint Tax Committee’s Revenue Estimates,” by Robert J. Shapiro and Aparna Mathur, for the self-described center-left think tank, NDN, said the JCT based its views on assumptions that aren’t true or are unsupported.
There has been a lot of back and forth over a repatriation holiday over the past several years as those for the measure say it’s a cheap stimulus for an ailing economy. Other supporters include Senator Chuck Schumer and former Service Employees International Union head Andy Stern. Those against the measure are part of two categories: those that feel the first tax holiday of 2004 didn’t work in that it didn’t create jobs or boost the economy and those that are advocating for more permanent change in the corporate tax code. Just last week, House Ways and Means Committee Chairman Dave Camp (R, MI) introduced a bill cutting the corporate tax rate to 25 percent and exempting 95 percent of corporate profits held offshore from taxation in the US (see related story here).
One member of the Quantria team that did the assessment was John O’Hare, an analyst who worked for the JCT for 15 years. Proponents of a tax holiday hope that his inclusion in the study would lend more credence to the report, which was commissioned by corporations, and other proponents of, a tax holiday.