Sen. John McCain's defenses of his proposed repatriation tax holiday
are getting more and more anemic:
Even if it only spurred buying of yachts and private jets, an overseas profit repatriation tax holiday would give a worthwhile boost to the U.S. economy, Republican Senator John McCain said on Tuesday.
In defense of legislation he is offering in Congress, McCain said his bill would try to ensure that profits brought into the country from abroad at a reduced tax rate would be devoted by corporations to investment and job creation.
"If you brought $1.5 trillion back to the United States of America, it's bound to have some positive effect somewhere," he said at the Reuters Washington Summit. "I don't see how it would not. Even if they buy more yachts and ... corporate jets and all that, it's bound to have some effect."
Hey, what the hell. It's gonna help somehow, right? Maybe if we let companies shuffle their money around without so much nasty tax they'll suddenly feel like blowing that money on a new corporate yacht that would otherwise seem like a bad idea. Then they can call it an "investment" and a dozen or so yacht-builders will be happy.
See, here's the thing. We tried the "repatriation tax holiday" very recently, under Bush. It didn't work. It resulted in more money coming back to the U.S., but that money didn't go into job creation. I could understand if it was some newfangled idea and you were hypothesizing that it might do this-or-that, but it's not a new idea, we did try it, and it didn't work. So insisting that we do it again, on the exact same pretenses as the first time around, seems either illogical or insincere.
The notion is that if we give a tax break to corporations to move money stashed offshore back to the U.S., this will result in an influx of money, which we will then tax at the much-reduced rate (instead of the normal rate, so the government is actually losing money, just getting some money more quickly): Somehow all that then translates into blah blah blah + magic sparkles + poof! New jobs. Take out the "new jobs" part, and it's clearly just a boon to the largest of large international companies, at the expense of everyone else.
What none of the friends of the job creators ever point out, however, is that there's another way to get the same immediate cash influx: raise the tax rates on repatriated money, but delay the onset of those taxes for a few years. If you were to declare tomorrow that the tax rate for repatriated cash was to become, say, 38 percent in 2013, then between now and then you'd probably see a lovely influx of money as major companies try to game themselves into avoiding that new tax. (You wouldn't even have to follow through with raising the tax rate, in fact. If you repealed it the day it was supposedly going to take effect, it'd have the same impact.)
Oh, but nobody ever suggests that. Heavens, no. Instead, what we've had for the past half-decade are large companies hoarding offshore cash in the expectation of another "tax holiday" rolling around. The notion of "holiday" has had a detrimental effect, by convincing companies that they should not bring profits back to America unless they are again bribed to do so.
Screw that. Let's raise the tax rates. That will have the same effect as what McCain is proposing, but at absolutely no cost to taxpayers or the government..