CTJ Report: Proposal for Tax Holiday Rewards Tax Dodgers

Citizens for Tax Justice (CTJ) released a report yesterday criticizing Rep. John Delaney’s (D-MD) proposal to allow corporations a tax-free holiday.

Under the proposal, H.R. 2084, multinational corporations would be allowed to bring their untaxed profits back into the United States without paying any taxes, assuming they invest in a bank to fund infrastructure projects.

In addition to tax benefits, corporations that most take advantage of the holiday would be given the privilege of choosing a super-majority of the infrastructure bank’s board of directors. Seven out of the 11 board members would be appointed by corporations purchasing the largest amount of bonds, which would be purchased based on profits brought back into the country.

Delaney’s website elaborates on his plans, explaining that the infrastructure bank, called the American Infrastructure Fund (AIF), would be funded by the sale of $50 billion in bonds. The bonds would pay a fixed rate of one percent. Corporations would pay no tax on profits repatriated from overseas to purchase bonds. The exact tax savings would be determined in an auction.

Citizens for Tax Justice calls the proposal a “strange and problematic way to fund infrastructure projects.” The proposal rewards corporations that have dodged American taxes by keeping profits overseas.

According to the report, a previously attempted 2004 tax holiday was a failure. The holiday resulted in job losses. Money returned to the U.S. at lower tax rates was invested in stocks – despite a prohibition of stock investment under the terms of the tax holiday. Based on those results, the Joint Committee on Taxation warned in 2011 that another tax holiday would probably encourage American corporations to move more profits overseas, as opposed to investing them domestically.

To read the full report by Citizens for Tax Justice, click here.

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