The technology industry has lined up a political dream team in its fight for a tax break on more than $1 trillion in profits earned overseas.
Supporting players include Democratic and Republican lawmakers, tea partyers and outside organizations such as Grover Norquist’s Americans for Tax Reform.
The White House, however, shows no sign of embracing proposals to slash the 35 percent tax rate on profits that multinational companies want to bring home. The administration dealt supporters another blow Monday by leaving the concept, known inside the Beltway as repatriation, out of its $4.4 trillion deficit reduction plan that President Barack Obama unveiled in a Rose Garden speech.
Companies that make a significant amount of money overseas argue that the high U.S. tax rate on returned profits prevents them from bringing that money back to the country and investing it in new projects here.
It is one of several areas where Silicon Valley executives and their lobbyists are growing frustrated that Obama — once ballyhooed as the “tech president” — has failed to advance many of the policies they see as crucial to their industry and economic recovery.
“The technology industry — the Ciscos and Oracles of the world — has been completely enmeshed in this administration from a rhetorical standpoint from the get-go, but when it comes to results, they have gotten very little,” a Democratic technology lobbyist said. “Every time they ask for something, the administration doesn’t deliver.”
Jason Mahler, vice president for government affairs at Oracle, agreed. “We’ve tried to put forward some things that we think help bring the economy back, including repatriation, and [members of the Obama administration] haven’t really taken an interest,” he said.
“Some of the rhetoric on tax policy coming out of the administration has been disappointing, whether it’s characterizing global companies that have to operate in other markets to compete as bad actors or whether it’s repatriation,” said Bret Wincup, director of government relations at the Information Technology Industry Council. “We, as tech companies, tend to get lumped into the rhetoric of shipping jobs overseas.”
But the dismal economic outlook and endorsements from prominent Democrats, including former Democratic National Committee Chairman Howard Dean, have given repatriation advocates renewed hope that a tax holiday can be nailed down this year. Supporters have formed the “Win America” public relations campaign run by SKDKnickerbocker, the PR firm that managed President Barack Obama’s election and is home to Anita Dunn, Obama’s former communications director.
“If there was ever a time to cut a deal on this, it’s now,” said a technology industry lobbyist involved in the effort. “If it doesn’t happen between now and December, it won’t happen in an election year, and the money will be reinvested overseas.”
In blog posts and interviews, the administration has repeatedly dismissed the notion that lowering the tax would boost the economy, citing the expense of a previous tax holiday in 2004.
“We’re not going to do that, repatriation outside of corporate tax reform, because for the simple reason that it costs a lot of money,” Treasury Secretary Timothy Geithner told CNBC last week. “It costs between $20 [billion] and $80 billion to do that over 10 years, and if you’re going to do that, you have to be able to pay for it, and how are you going to raise taxes on the 96 percent of companies across the country that don’t benefit from repatriation?”
The campaign is also working to win over some Congressional Democrats and conservative Republicans who argue that the idea is a corporate bailout and that the companies will use repatriated cash for dividend payments instead of for job creation.
A 2009 Congressional Research Service study found “no evidence of a corresponding increase in domestic investment or employment” from the 843 corporations that brought back a collective $312 billion in 2004.
Still, some lobbyists say White House officials have privately expressed interest in the idea and they are optimistic the administration could come around if it can be used as a bargaining chip in negotiations with Republicans.
A recent U.S. Chamber of Commerce study found that the U.S. economy would expand by as much as 4 percent over two to three years, allowing businesses to create about 2.9 million jobs, if lawmakers agree to a repatriation tax holiday.
Win America has hired ex-Rep. Jim McCrery (R-La.), the former ranking member on the Ways and Means Committee, to lobby House Republicans and Mark Isakowitz, the former director of federal governmental relations at the National Federation of Independent Businesses, to work centrist Republicans. On the Democratic side, they’ve pulled in Jeff Forbes, former chief of staff to Sen. Max Baucus (D-Mont.), the chairman of the Senate Finance Committee and a member of the Joint Committee on Deficit Reduction.
The campaign has also been working with Let Freedom Ring, a tea party group that helped drive the Republican Study Committee’s Cut, Cap and Balance mantra.
Rep. Kevin Brady, a Texas Republican on the Ways and Means Committee, introduced legislation in May that would call for an immediate tax holiday allowing companies to repatriate overseas profits at a 5.25 percent rate. And Sen. Kay Hagan (D-N.C.) is considering whether to introduce a similar bill.
The team of lobbyists see three potential ways to get the job done: Get the super committee to take it up; include it with a series of expiring tax provisions; or attach it to the president’s jobs bill.
With patent reform completed, repatriation is among the industry’s top priorities, along with completion of several outstanding free-trade agreements and an extension of the research-and- development tax credit.
Correction: Sept. 20, 2011
An earlier version of this article misstated that the Service Employees International Union supports the idea of a repatriation tax holiday. The SEIU's former president, Andy Stern, has endorsed the idea, but the union has not.
Rep. Elijah Cummings, D-Md., right, hugs Harold Schaitberger, General President of the International Association of Fire Fighters, after the Congressman spoke at the IAFF's Legislative Conference General Session at the Hyatt Regency on Capitol Hill, March 9, 2015. The day featured addresses by members of Congress and Vice President Joe Biden.