Congress granted corporations a tax holiday in 2004 that let them bring back their profits at a tax rate of about 5 percent, or one-seventh of what the normal tax law required. Clinton, then a senator from New York, voted for it, as did Schumer.
The incentives haven’t changed since then, so profits held overseas by U.S. multinationals have accumulated again and have now reached an incredible $2.4 trillion. That’s about 65 percent of the 2015 federal budget and 13 percent of the entire U.S. economy. If U.S. multinationals had to pay the statutory tax rate on that, they’d owe the government about $695 billion.
The prospective Ryan-Schumer deal doesn’t have many details. But it would change the law so that profits earned by U.S. multinationals overseas, including the $2.4 trillion overseas now, would be taxed whether or not they were brought back to the U.S. — while also radically reducing the tax rate on those overseas profits. This would essentially make the 2004 tax holiday permanent. That’s why Sen. Elizabeth Warren, D-Mass., has called such plans “a giant wet kiss for the tax dodgers.”
But how do we know this is what Clinton was talking about?
According to her platform, she will pay for increased infrastructure spending via some unspecified “business tax reform.” Despite promises back in December that she “will have more to say on her vision” about business tax reform, she’s been curiously silent.
However, when she met with the New York Daily News editorial board in April, she explained that the source of the infrastructure money “may be repatriation.”
Then there’s her statement this week that her infrastructure bank would “will bring private sector dollars off the sidelines and put them to work here.” That phrase — bringing corporate money “off the sidelines” — is a favorite of both Democratic and Republican elites to describe slashing the tax rate on overseas profits. For instance, Sen. Marco Rubio, R-Fla., used it in a Wall Street Journal op-ed, as did economists writing for the New America Foundation, a liberal think tank.
That’s why Clinton can honestly predict that she will “break through the dysfunction in Washington” and “work with both parties.” Both parties want to deliver a massive tax cut to their huge corporate patrons.