We appear to be on the verge of a deal to raise the debt ceiling, and there seems to be a chance that it’ll contain some things that will horrify many working people and most Democrats. One of these is a “tax repatriation holiday,” in which corporations who have profits “stashed” overseas, can bring those profits back into the U.S. tax free.
In the last few days, I’ve had conversations with conservatives, and I think there’s a compromise position that appeals to both sides, appeals to patriotism, but “gets something in exchange” for the tax holiday. Which would be a good thing, because despite the rhetoric, we all know that American companies are not going to automatically turn around and use the profits to hire Americans.
The reason we know this is that they have plenty of profits onshore, and they haven’t used those profits to hire many people, either. For a simple reason — the economy lacks sufficient demand to require new hiring. This has been exhaustively covered elsewhere, so I won’t bore you by repeating the evidence.
So, if we want jobs in exchange for a tax repatriation holiday, here’s how we do it.
Under a program which automatically sunsets (say, 5 years, but that’s negotiable), American companies are allowed to repatriate profits tax-free, for each new job created in the United States. In order to create incentives for full-time jobs, capable of supporting a wage earner and their family:
- For each new job created, a company would be allowed to repatriate a multiple (M) of the fully burdened cost of the employee. “Fully burdened” means wages and benefits — the total cost of having someone on staff.
- Each job would be eligible for the repatriation credit in each year the program existed, perhaps at a declining modifier. This creates incentives to keep the jobs created, and not lay them off on Day 366.
- Attaching the credit to the fully burdened cost, rather than the salary alone, creates incentives for companies to create full-time jobs that carry benefits, which are essential to ensuring that jobs can support families. Indeed, the better the benefits a company provides, the more profits it can repatriate.
- Also, using the fully burdened cost allows the plan to work easily in those industries with union contracts, since it does not specify anything about the structure of compensation.
There are obviously details that need to be worked out. What is the multiplier? How long does the program or credit last? Should we simply keep a program like this in perpetuity as a means of allowing global trade to be “open” but still incentivize domestic job creation? Should the repatriation by completely tax-free in year one, and at a steep discount off normal tax rates in future years?
The main outlines sound fair, and even patriotic. And it’s a mix of liberal and conservative ideas. From my initial discussions with folks, the idea seems to appeal to both sides, and sounds “fair” both to companies and to the country.
Kick it around a bit, share it with friends, and tell your Congressperson about it.