US lawmakers on January 29 revealed two different plans to address a shortfall in the US Highway Trust fund, each seeking revenue from US multinationals that defer tax on profits from overseas operations.
US Senators Rand Paul, R-Ky., and Barbara Boxer, D-Calif., announced they will introduce legislation that would allow US companies to repatriate their foreign earnings at a tax rate of 6.5 percent, with all revenue from the tax incentive going to the Highway Trust Fund.
The Invest in Transportation Act of 2015 would require the repatriated funds to be used only for “increased hiring, wages and pensions; R&D; environmental improvements; public-private partnerships; capital improvements; and acquisitions,” a white paper explaining the proposal said.
Funds can not be used to increase executive compensation, shareholder dividends, or stock buybacks for three years after the program ends. Also, if a company inverts within 10 years, it must pay back the incentive with interest.
The special tax rate would only apply to repatriations that exceed a company’s average repatriations in recent years.
“This bipartisan repatriation proposal is a win-win for our economy and our country. First, it will bring back hundreds of billions of dollars in foreign earnings that are sitting offshore, which can be invested here in America to create jobs. Second, the taxes paid on those earnings will be used to extend the Highway Trust Fund, which supports millions of jobs nationwide,” Boxer said.
Rep. John K. Delaney, D-Md., and Rep. Richard Hanna, R-NY., also announced a proposal January 29 to shore up the Highway Trust Fund by accelerating taxation of overseas earnings.
The Infrastructure 2.0 Act would establish a deemed repatriation for overseas profits of US multinationals, which would be subject to a mandatory one-time 8.75% tax rate, Delaney said in a release.
The tax would produce enough revenue to provide an additional $120 billion to the Highway Trust Fund, Delaney said.
The bill also includes a trigger for broader international tax reform. It would set an eighteenth month deadline for international tax reform to encourage action. If the deadline is passed, a fallback international tax package would be implemented that would end deferral, reduce rates, and penalize companies that use tax havens.
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