US Corporate Tax Holiday Could Create Thousands Of Jobs

by Mike Godfrey, Tax-News.com, Washington

23 October 2003

Supporters of a tax holiday that is being proposed for US multinational corporations as part of the Extra Territorial Income Exclusion Act repeal claim that the measure would create well over half a million jobs, and significantly aid the country’s economic recovery.

The proposal in question was attached to a version of the tax bill passed by the Senate Finance Committee last month, and allows firms to repatriate income earned overseas at a rate of 5.25% tax as opposed to the standard 35% corporate tax rate. Advocates of the move have pointed to a study undertaken by economist Allen Sinai of economic and financial consultancy firm Decision Economics, which concluded that the measure will create over 665,000 jobs in the United States. Other studies predict that US firms will repatriate some $400 million under the scheme.

The measure has strong support inside Congress, and unsurprisingly from the corporations which stand to benefit. However, Treasury officials have been less enthusiastic about the proposal and assistant secretary for Tax Policy at the Treasury, Pam Olson warned the Senate Finance Committee in July that companies may use the tax holiday in ways “the committee may not find appropriate”.

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