MILLER: Bring home $1 trillion

Territorial tax system would make America more competitive

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More than a trillion dollars in U.S. corporate profit sits around the globe, just waiting for a good reason to come home. With the most anti-business tax system in the developed world, the United States encourages companies doing business offshore to leave their profits overseas. The money would easily flow back into our economy if Washington shifted to a territorial tax system and lowered the corporate tax rate. The time to move on this is now.

The House Ways and Means Committee is finalizing a draft proposal to lower the corporate tax rate from a high of 35 percent to 25 percent and then rewrite the tax code so companies will pay only taxes in countries where profits are made. Committee Chairman Dave Camp, Michigan Republican, plans to have hearings and get input from various stakeholders as he drafts final legislation.

Currently, multinational corporations that make money overseas are first taxed at the corporate rate of the foreign country in which they do business. Then the profits are taxed again when repatriated at the difference between the foreign taxes paid and the U.S. corporate tax rate. Since America has one of the highest corporate tax rates in the world, companies prefer to leave profits abroad and avoid this additional levy.

An estimated $1 trillion could be brought back home immediately for private-sector investment and job creation. Under the territorial tax system used by the rest of the world, companies pay the corporate taxes in foreign countries where the profits are made, and they can bring profits back home without further penalty.

The House Republican leadership supports adopting this system. Chief Deputy Whip Peter Roskam, Illinois Republican is on the tax-writing committee. “A territorial tax system would put American companies on a level playing field at home and abroad, making our economy significantly more competitive globally, and in turn creating jobs here,” he told The Washington Times.

Some of the Republican presidential candidates are also on board. “Foreign profits are staying offshore because of double taxation,” Herman Cain told The Washington Times in a recent interview. “Common sense says, don’t tax ‘em, and the money will come back home. It’s called low-hanging fruit.”

It’s also a top priority for Mitt Romney. “Governor Romney supports switching to a territorial tax system because it would enhance the ability of American companies to compete around the world and would end the perverse incentives that keep them from repatriating profits to the United States,” campaign spokesman Ryan Williams told The Washington Times. “Domestic companies that can compete vigorously abroad are in a better position to grow and create jobs at home.”

House Republicans need to move a territorial tax bill and put the pressure on Senate Democrats and President Obama in the election year. Our economy is stagnant, so allowing money parked in Swiss bank accounts to flow into U.S. investment opportunities is just the sort of thing that could restore America’s economic strength.

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