Foreign profit tax break was costly bomb: report

Tue Oct 11, 2011 12:33am EDT
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By Kevin Drawbaugh

WASHINGTON (Reuters) - Congress should not endorse another big tax break for overseas corporate profits because the last one in 2004-2005 was a costly failure, said U.S. congressional investigators in a report released on Monday.

With an army of lobbyists pushing on Capitol Hill for a repeat of the Bush administration's 2004-2005 program, the head of the Senate Permanent Subcommittee on Investigations urged lawmakers to reject another corporate give-away.

"We can't afford a tax break that would deepen the deficit, disadvantage domestic firms, and push more corporate dollars offshore, while failing to stimulate the economy," said Senator Carl Levin in a statement on his panel's report.

Levin was joined by Senator Kent Conrad, a fellow Democrat, in writing to Congress' deficit-reduction "super committee," urging members to refuse lobbyists' pleas for a second overseas corporate income repatriation tax "holiday."

Bipartisan legislation that would allow the tax break -- estimated to cost taxpayers nearly $80 billion over 10 years -- was introduced last week in the Senate, with a similar bill offered months ago in the House of Representatives.

The repatriation tax holiday idea has some support, but analysts do not expect it to be approved on its own. Rather, it could be tacked onto a broader tax and spending bill.

"I'm hoping the facts can break through the lobbying frenzy over yet another corporate tax give-away that makes no sense and would damage our economic recovery," Levin said.

The subcommittee's report found that the last repatriation tax holiday cost the Treasury at least $3.3 billion in net revenue lost over ten years and that it "produced no appreciable increase in U.S. jobs or domestic investment, and led to U.S. corporations directing more funds offshore."   Continued...

<p>Clouds pass over Capitol Hill in Washington August 1, 2011. REUTERS/Joshua Roberts</p>