Senate Passes Smith Repatriation Provision
with JOBS Act
Tax Relief Would Create Over 650,000 New Jobs
Washington, DC - Today, the U.S. Senate passed the Jumpstart Our Business Strength Act (S. 1637) which contains a provision inserted by Senator Gordon Smith (R-OR) which would temporarily lower the corporate tax rate on repatriated profits.
"With this relief, U.S. businesses will invest almost $400 billion in our economy," Smith said. "It will create hundreds of thousands of new jobs and get our economy moving again. It is exactly what we need to get people back to work."
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 JOBS Act 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.
On Wednesday, May 5, Senator John Breaux (D-LA) introduced an amendment that would significantly alter these provisions, effectively negating their positive impact. In a bipartisan vote, the Senate defeated the amendment 68-31.
A study performed by renowned economist Allen Sinai estimates that the repatriation provisions would create 666,000 new jobs while increasing federal tax revenue by $12 billion annually. In addition, it would increase capital spending by an average of $30 billion per year while increasing real GDP growth up to 0.9 percentage points.
"Jobs and long-term investments are the key components of an enduring recovery," Smith said. "Although this is short-term tax relief, its positive impacts are going to last for years to come."
