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Washington • Rep. Jim Matheson on Wednesday pitched a temporary change in the tax code that would allow American companies that have parked more than $1 trillion overseas to bring it back to the United States under a much-reduced tax.
Under the new legislation, a U.S. company with a foreign subsidiary could invest money earned abroad back into its American operations in 2011 or 2012 and pay 85 percent less in taxes.
"Having an infusion of private sector capital on-shore in America is a pretty good thing to do for the circumstances we're in right now," Matheson, D-Utah, said.
Right now, a U.S. company that re-invests back home any profits earned overseas faces a 35 percent tax rate (minus any foreign taxes paid) on that money, but the Matheson bill would put that rate at 5.25 percent. The act of moving foreign dividends back to U.S. soil is called repatriation.
The bill is co-sponsored by Rep. Kevin Brady, R-Texas, two Republicans and two Democrats.
"This is a major injection in the economy now when we need it most," Brady said.
John Chambers, the chairman of Cisco Systems, and Safra Catz, president of the Oracle Corp., wrote in a Wall Street Journal op-ed last October that allowing companies to bring profits back to U.S. soil "could create a privately funded stimulus of up to a trillion dollars."
"The amount of corporate cash that would come flooding into the country could be larger than the entire federal stimulus package, and it could be used for creating jobs, investing in research, building plants, purchasing equipment, and other uses," the chief executives wrote, noting that it could also reap $50 billion in tax revenue.
Treasury Secretary Timothy Geithner has said that the Obama administration would consider such a tax holiday only as part of an overall tax reform package — not by itself.
Matheson countered that without his legislation the money will continue to stay overseas and it's better to have it now than wait years for tax reform to pass and take effect.
The measure does not yet have a Senate sponsor.
Utah Gov. Gary Herbert wrote in a letter to House Speaker John Boehner on last March that a temporary change in the tax code would greatly benefit Utah's technology, service and life science companies.
"Many of these companies have been successful selling products overseas and the Utah economy would greatly benefit from a federal tax system that incentivizes them to return their foreign earnings back home," Herbert wrote.