Today, U.S. Representatives Jim Renacci (R-OH) and John Carney (D-DE) introduced legislation to encourage American companies to bring foreign profits back from overseas specifically to hire more American workers and invest it in the U.S. economy.
"Right now we have the highest corporate tax rate in the world," said Rep. Renacci. "That means companies who make money in other countries often times avoid reinvesting their profits back into the U.S. economy due to our extremely high rate of taxation. This legislation would allow companies to return those profits to America at a significantly lower rate so long as they are used to create American jobs. The idea of a short-term repatriation holiday has been tried in the past, in my opinion unsuccessfully. Without an ironclad requirement that the returning profits would be used to hire American workers or invest here at home, it was merely a corporate stock and bonuses giveaway. This bill ensures profits brought back will be used to create jobs in Ohio."
"American companies have roughly $1.4 trillion in foreign earnings sitting overseas, not being invested in the U.S. economy," said Rep. Carney. "With high unemployment and a struggling economy, this bipartisan legislation incentivizes companies to bring that money back to the U.S. to reinvest and hire new workers. There are strict mechanisms in place to ensure that only money being used to increase payroll or purchase new assets is eligible for the lower tax rate. This legislation will generate revenue, create jobs and increase investment in Delaware and across America."
The legislation would install a ten year system for repatriating foreign earnings from overseas. This allows for more certainty, predictability and long-term planning than a one-off "holiday." The system would apply the dividends received deduction (5.25% effective tax rate) to foreign earnings equal to the amount by which a company increases Social Security wages over the prior year, and invests in new tangible fixed assets in a tax year. By limiting the calculation to Social Security wages the legislation eliminates repatriation of profits for increased executive compensation or bonuses. Also, by requiring an increase in wages or new investment, companies are rewarded for job-creating growth after they hire instead of allowing the deduction first and not knowing whether it will be used to stimulate growth.
More on the co-sponsors
Rep. Renacci is serving his first term in the U.S. House of Representatives, where he is a member of the Financial Services Committee. Prior to his election he worked as a Certified Public Accountant in the health care industry, and owned and operated over 60 other businesses in the automotive and sports management fields.
Rep. Carney represents the state of Delaware in the U.S. House of Representatives, where he serves on the Financial Services Committee. He was previously elected to two terms as Lieutenant Governor of Delaware from 2001-2009 and served as Delaware's Secretary of Finance during the Carper Administration from 1997-2000.