A tax break for multinational corporations favored
by the technology industry survived a contentious committee vote in the U.S.
House of Representatives late Monday night and now moves to a full floor
vote later this week.
Part of a much broader, complex bill aimed at halting European Union (EU)
trade sanctions, the measure approved by the House Ways and Means Committee
reduces foreign dividend taxes from 35 percent to 5.25 percent for one year.
A similar provision is included in the Senate version of the bill passed
last month.
Tech proponents say the tax break will “repatriate” more than $300 billion
into the U.S. economy and create as many as a half million new jobs. Both
Democratic and Republican critics of the provision say it rewards companies
for shipping jobs overseas.
The overall bill passed by the House committee — the Jumpstart Our Business
Strength (JOBS) Act — is aimed at addressing the sanctions that went into
effect March 1, when the EU began collecting a five percent penalty tariff
on a wide variety of U.S. goods. The penalty increases by one percent per
month over the next year.
The sanctions followed a ruling last year by the World Trade Organization
(WTO) that called an annual $5 billion tax break given to U.S. exporters an
illegal export subsidy. The WTO set a March 1 deadline for Washington to
change its tax code or be penalized. The House and Senate fix is the JOBS
Act, which alters portions of the corporate tax code in order to satisfy the
WTO and redistribute the tax breaks.
A full floor vote on the bill is tentatively scheduled for Thursday. If the
bill passes, differences between the House and Senate versions of the
legislation would be worked out in a joint conference committee before being
sent to the White House for President Bush’s approval.
As in the Senate debate
over the bill, Democrats in the House attempted to eliminate or sharply
reduce the foreign dividend revenue provision to underscore their concern
about offshore outsourcing. In the House, the one amendment to delay the
provision was defeated.
The multi-nation tax break has been championed TechNet, the
influential political lobbying group of CEOs and senior partners whose
members include Intel , Cisco
,
Hewlett-Packard and Microsoft
.
In March, the TechNet executives sent a letter to
the White House strongly endorsing the foreign dividends provision.
“Under this proposal, impact on federal revenues is expected to be positive
for the first year and negligible over a ten-year period; at current
taxation levels, these dollars would just remain overseas,” the executives
wrote to President Bush. “In short, here’s a way to enable a tremendous
amount of domestic spending without increasing taxes, reducing federal
revenues or taking money away from needed federal programs.”
The letter adds, “Once this money is repatriated, specific targeted
incentives can ensure that it is invested for maximum economic impact.”
