Tech Execs Work Washington for Tax Help

Led by Silicon Valley venture capitalist John Doerr, more than 70 CEOs and executives are working Washington this week with a targeted economic agenda top lined by free trade and aggressive tax cuts and incentives for the technology industry.

Private sector technology leaders from California, New England, Texas and Washington State are pressing their case with key White House economic advisors, Secretary of State Colin Powell and Attorney General John Ashcroft, as well as Republican and Democratic Congressional leaders.

The executives represent TechNet, the 150-member exclusive network of CEOs and senior partners founded four years ago by Doerr to lobby Washington on national technology issues. Its members include Hewlett Packard chief Carly Fiorina, Intel’s Craig Barrett, John Chambers of Cisco Systems .

“We believe in a robust free trade agenda. Open markets for U.S. countries across the board,” says TechNet spokesperson Jim Hock. “In the end that will create the best and highest paid jobs.”

Hock acknowledges technology jobs flowing overseas are a Congressional problem in an election year. Wednesday afternoon, for instance, Sen. Christopher Dodd (D-Conn.) moved to prohibit offshoring of IT-related jobs by federal and state governments.

TechNet believes the problem could be dealt with public and private retraining initiatives financed by tax credits. According to the TechNet Day policy taking points, “effective retraining” programs will “ensure American workers are prepared for the high-skill jobs of the future.” TechNet hasn’t taken a position on the Dodd legislation.

Another key element of the TechNet platform is to build support for its two-year-old proposal to reduce the tax on foreign dividends from 35 percent to 5.25 percent for one year. Citing a J.P. Morgan study, Hock says the initiative would “repatriate” more than $300 billion into the U.S. economy and create as many as a half million new jobs.

“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,” TechNet 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.”

The proposal has gone nowhere in Congress. Introduced as the Invest in the U.S.A. Act (S. 596) last March by Sen. John Ensign (R-Nev.), the bill has yet to receive a hearing.

Other technology tax strategies supported by TechNet include a short-term refundable Investment Tax Credit (ITC), shorter tax depreciation schedules for capital investment and permanently extending the Internet access tax moratorium that expired in November and the research and development tax credit set to expire in June.

“An ITC would have a significant stimulative effect both by spurring near-term investment in the domestic economy and by encouraging spending on longer-term productive assets,” the TechNet letter to Bush states. “This credit would enable businesses of all types to purchase capital assets at a time when they would otherwise be unable to do so and provide a kick-start for the economy.”

An added benefit, TechNet adds, is that ITC “positively impacts earnings, which, in turn, positively impacts stock price.”

Depreciation schedules that no longer realistically reflect the economic life of equipment, TechNet contends, pose a disincentive to capital investment.

“Companies are forced to delay modernization or to forego full recovery if they do go ahead and invest in new equipment,” the tech executives told Bush in 2002. “Accelerating the depreciation of these assets would eliminate this disincentive and encourage investment that will stimulate the economy. Furthermore, it will help American industry compete better with countries such as Japan, where the depreciation schedules are already shorter.”

The TechNet plan would have a one-year depreciation schedule for all high-tech investments and low-value software purchases, a three-year depreciation schedule for all equipment and major software purchases or developments and a five-year schedule of 20 percent per year for buildings.

Hock admits TechNet’s tax proposals face an uphill battle in Congress this year. But a growing political contribution war chest combined with the weight and cachet of its membership are expected to keep TechNet’s agenda before lawmakers in the future.

“We are aggressively bi-partisan. This industry doesn’t lean Democratic or Republican,” Hock says. “It supports those who support its industries and its policies.”

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