Sen. Carl Levin is opposing a member of his own party, Sen. Charles Schumer, on a proposed corporate tax holiday on overseas profits. Levin says a similar break in 2004 didnt create any jobs and that another tax holiday could hurt domestic investment.
"It's a terrible idea," Levin said. "The only thing [that] was good is executive salaries went up."
Levin said the plan would add either $40 billion or $80 billion to the deficit over the next decade, depending on whether the tax rate for the holiday was set at 10.5 percent or 5.25 percent, citing scores from the Joint Committee on Taxation.
"That is a huge hole in the Treasury," Levin said. Levin added that the proposal actually could hurt domestic investment by rewarding companies that have already shipped jobs overseas. "It's unfair competitively to companies that don't move jobs offshore," he said.
Levin even tied the issue to the Occupy Wall Street protests. "What the demonstrations reflect is a sense in this country that certain people have been given special treatment at the expense of the rest of us. That's what those '99' signs are really all about."
Rep. Barney Frank (D-Mass.) said last week that giving repeated tax holidays creates an incentive for companies to ship jobs overseas if they have an expectation of more tax holidays to come, he said. And Frank said if there is a holiday, companies should have to pay "at least half" of what they owe, not the 5.25 percent rate they enjoyed in 2004.
Some Republicans, including House Ways and Means Chairman Dave Camp (Mich.) and Senate Finance ranking member Orrin Hatch (Utah) also have been wary of embracing a tax holiday outside of a larger overhaul of business taxes. Rep. Patrick Tiberi (R-Ohio), a member of the Ways and Means Committee, said Republicans on the panel are leery of doing more short-term tax deals unless they deal with the code itself.
"It doesn't solve the problem," Tiberi said.
Tiberi said what he hears from businesses back home is that they want more certainty. "This temporary stuff is driving them crazy," he said. And he warned that doing repatriation first could remove some of the pressure for broader tax reform as part of a growth agenda.
McCain, Cantor and other repatriation supporters also want to see broader tax reform but don't want to wait.
Even if a bipartisan majority emerges to back the holiday, partisan splits could derail it. Schumer's plan to link the idea to an infrastructure bank may add even more to the deficit — and Schumer is also expected to include Davis-Bacon labor rules, a policy prized by unions but anathema to many in the GOP.
Cantor spokeswoman Laena Fallon said the repatriation issue should stand on its own. It should not be tied "to politically divisive things," she said, referring to Schumer's plan. "Rather than attaching unrelated proposals to score political points ... let's get something done," Fallon added.
McCain was also frosty to Schumer's plan to tie it to an infrastructure bank.
"Why tie it to anything?" McCain asked. "Why not just go ahead and get this $1.4 trillion back to this country and, clearly, with some caveats that they invest and create jobs, which we can provide incentives for?"
A senior Democratic aide dismissed the GOP criticism.
"They are nuts if they think they are getting repatriation by itself," the aide said.
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