Momentum is growing in Congress behind legislation to enact another “repatriation tax holiday” that allows multinational corporations to bring profits held overseas back to the United States and pay tax on them at a rate of only about 5 percent (rather than the normal tax rate 35 – 45% on corporate profits ). But the economic or fiscal case for doing so remains poor.Moreover, a new tax holiday would increase budget deficits by tens of billions of dollars over the coming decade. And unlike the 2004 repatriation holiday, which was sold as a “one-time-only” event, a second holiday would send a powerful message to corporations to shift investment and jobs overseas and hold the profits there — until yet another tax holiday is declared. Indeed, enactment of another such tax holiday would further embed the shifting of investment, jobs, and profits overseas as a major tax avoidance strategy for many U.S. multinational corporations.
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