Senate Finance Committee Passes JOBS Act with Smith Repatriation Provision
Study indicates provision could create 500,000 new jobs
Washington, DC – Today, the Senate Finance Committee passed the Jumpstart Our Business Strength (JOBS) Act that included a provision written by Senator Gordon Smith to encourage American businesses to repatriate their foreign earnings and invest them in the United States.
"In one year's time, this bill is going to bring $135 billion into our economy," Smith said. "That money is going to be used for pro-growth, job-creating investments, something our economy desperately needs."
Currently, U.S. companies are required to pay taxes at a thirty-five percent rate on foreign earnings when these earnings are brought back to America. This creates a massive incentive to keep funds offshore rather than invest surplus earnings at home. Many other countries exclude foreign dividends from domestic taxation under so-called "territorial" tax systems, which encourages domestic investment of surplus foreign earnings.
Smith's provision would provide the U.S. economy with a large near-term increase in domestic investment by lowering, for one year, the corporate tax on repatriated profits to 5.25 percent. To be eligible for the discounted rate, businesses must use the repatriated funds for job creating investments such as research and development, employee hiring and training, and other capital investments.
Congress' Joint Committee on Taxation estimates that Smith's repatriation provision will result in a $135 billion injection into the U.S. economy within a year of enactment. Further, a study performed by JP Morgan Chase Bank estimates that this legislation would create between 400,000 and 500,000 new American jobs over a two-year period. It would also increase tax revenues by $4.1 billion in the first year.
"Despite signs that the economy is on the rebound, too many people are still out of work," Smith said. "Providing businesses with the tools they need to create jobs and make long-term investments is the best way to ensure an enduring recovery."
