Tax Analysts Blog

"We Want That Money Back"

Posted on Jun 17, 2013

There is a new corporate tax coalition in town.

Such a statement would normally be as newsworthy as any other commonplace and irrelevant Washington phenomena such as "Congress is in session" or "President releases budget." But the newly-formed Alliance for Competitive Taxation has several features that other lobbying groups lack.

As might be expected, the group wants to lower the U.S. federal statutory corporate tax rate (from 35 to 25 percent), move the United States to a territorial system of taxation (where foreign profits are largely exempt from U.S. tax), and allow the cash portion of $1.7 trillion of "trapped" foreign profits to return home without paying full U.S. tax. Appearing yesterday on CNN's "Your Money" Laura D'Andrea Tyson, former Chair of the Council of Economic Advisors and now an economic advisor to the ACT coalition stated: "We have a system now where essentially there is a very strong incentive for a company that's selling abroad, competing abroad, earning income abroad, paying taxes abroad, not to bring that money back. That hurts the U.S. economy. We want that money back. We need that money back for creating jobs here, for creating investments in our community here." The table below displays publicly available data on the 10 members of the coalition with the largest amounts of unrepatriated foreign earnings.




What makes this group notable and different from other coalitions is its diverse membership. Other groups have usually been narrowly focused on lowering rates (because they do not have a lot of tax breaks or low-taxed foreign income) or maintaining lax international tax rules (because they currently have a lot of low-taxed foreign profits).

What also makes this group different is that it acknowledges corporate tax reform must be revenue-neutral. It recognizes many, if not most. business tax expenditures must be cut to get anywhere near a 25 percent rate. And it is being reasonable about a territorial system and any U.S. transition to such a system. It recognizes there would have to be anti-base erosion rules and that if companies want their money back they will have to pay some U.S. tax on those earnings (albeit, something well below the 35 percent minus foreign tax credits that would be due under current law).

This realistic approach would seem to confirm the view expressed by tax attorney Paul Oosterhuis at the Ways and Means Committee June 13 hearing on international tax reform that the multinational community is more willing now than any time in the last 20 years to embrace tax reform even if involves some pain. (See 54th minute of video of June 13 W&M hearing.) Given tight budgets and rising public perceptions that corporations do not pay their fair share of tax, pain inevitably will have to be part of tax reform. But even if we could get agreement on what corporate tax reform would look like (remember, all-important details about revenue raisers have not be aired, much less agreed upon), the effort would still be held up by a total lack of progress on where to go on individual tax reform and on a highly partisan political environment where hard-to-pass legislation like tax reform has little chance of survival.

Read Comments (3)

vivian darkbloomJun 17, 2013

Appearing yesterday on CNN's "Your Money" Laura D'Andrea Tyson, former Chair of
the Council of Economic Advisors and now an economic advisor to the ACT
coalition stated: "We have a system now where essentially there is a very
strong incentive for a company that's selling abroad, competing abroad, earning
income abroad, paying taxes abroad, not to bring that money back. That hurts
the U.S. economy. We want that money back. We need that money back for creating
jobs here, for creating investments in our community here."

The merits of the ACT position aside, it's not really clear to me why a
coalition like the ACT would need an "economic advisor". What is very clear is
that Ms Tyson is probably quite valuable for her political connections. Where
is the line between being an "economic advisor" and a paid lobbyist? A quick
search of Open Secrets dot Org suggests she's not registered. I think she
should be.

travis rechJun 17, 2013

If this wasn't an extremely good deal for multi-nationals, they wouldn't be
supporting it. Of course it is possible that the best interests of multinats
and the citizens of the US align, but usually when that happens they don't need
paid lobbyists and non-profit think tanks to push it through.

thurston howellJun 20, 2013

@travis

You sound like my mother. When someone gives her a present, she frets that its
some sort of a provocation or trick

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