Corporate foreign tax holiday would create jobs

As Congress takes a break from its highly partisan debate on an extension of the payroll tax bill, there should be one other job stimulus item on the table: temporary repatriation of foreign earnings at a lower tax rate for U.S. companies.

As CEOs of two Silicon Valley companies, each with more than 3,000 local employees, we want to ring a warning bell. Washington is about to walk away from a $1.4 trillion private sector stimulus that would result in billions in revenue to the Treasury and create jobs.

The New Democrat Coalition, Blue Dog Democrats and the Freshmen Republican Caucus all agree that repatriating foreign earnings at a lower tax rate is one of the few bipartisan solutions left to jump-start our struggling economy. The reduced tax rate has had considerable debate and it's up to Congress to make a decision. It was 5.25 percent in 2005.

Unfortunately, U.S. businesses - including many of the 345 member companies of the Silicon Valley Leadership Group - are hindered by an outdated tax system that ends up taxing foreign earnings by up to 35 percent. This is the combination of taxes paid in the countries where goods are sold and an additional tax by the United States when companies bring the money home. This double tax causes companies like ours to be uncompetitive against our foreign competitors, and it often discourages the reinvestment of earnings back into U.S. jobs and innovation. When additional state taxes are added, the average U.S. corporate tax rate rises to as high as 39.2 percent, the second-highest in the developed world, only slightly behind Japan's.

Congress can act now to bring this revenue home. Laura D'Andrea Tyson, former Clinton administration chair of the Council of Economic Advisers, found that a tax reduction on foreign earnings to approximately 5.25 percent would lead to an increase in capital spending by companies and an increase in consumption spending by individual and institutional shareholders. As a result, GDP would increase by $178 billion to $336 billion, 1.3 million to 2.5 million jobs would be added, and corporate tax revenues would rise by $36 billion.

Contrary to the rhetoric, there were great successes following the temporary reduction of the repatriation tax seven years ago.

Brocade Communications Systems repatriated approximately $75 million. The money was used to support workers' wages and compensation, growing our businesses and strategic investments. Since 2005, Brocade has increased its U.S. head count from nearly 1,000 employees to more than 3,500 at the end of 2010.

Varian Medical Systems repatriated approximately $128 million, using the funds for acquisitions, R&D initiatives that improved cancer care and expansion of manufacturing capabilities in Salt Lake City and Las Vegas. Our workforce has grown from 3,900 people to 5,300 at the end of 2010.

But these are just two small proof points that repatriation has been successful in the past. If Congress acts now to pass a temporary repatriation at a competitive tax rate, it will stimulate our nation's economy and create jobs. That's a proposal worthy of bipartisan support.

This article appeared on page A - 16 of the San?Francisco?Chronicle

Source: http://feeds.sfgate.com/click.phdo?i=8ee81b63ce89ed7dc8085222592c3ce2

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