U.S. Highway Shortfall Pushing Senate Towards Tax Holiday for Apple, Others

| Analysis

U.S. Tax HolidayThe needs of the U.S. Highway Trust Fund are pushing the U.S. Senate towards the idea of a tax holiday for U.S. companies that would allow them to repatriate offshore money into the U.S. The Highway Trust fund is projected to run out of money in August, while there are hundreds of billions of dollars worth of infrastructure repairs that need to be made on the system.

American corporations have more than a trillion dollars U.S. held offshore, in part because of the 35 percent tax rate that money would be subject to only when it is repatriated. Apple alone has more than $100 billion outside the U.S., and the company has borrowed money from bond markets in the U.S. and Europe rather than pay the repatriation tax.

No agreement has been reached, but Reuters reported that consensus is building for a new holiday based in part on the needs of the Highway Trust Fund. The last corporate tax holiday was in 2004, when U.S. companies were allowed to repatriate money for just 5.25 percent.

The results of that tax holiday have played a role in their not being another since. It was billed at the time as a way for U.S. companies to bring money back to the U.S. so that they could invest it in new opportunities. In reality, almost all of the money was used in stock buybacks and stock dividends, rather than reinvestment, and the effort was viewed as an exercise to enrich investors rather than the U.S. as a whole.

Reuters was short on specifics, but one way of dealing with that aspect of a tax holiday would be to pair the holiday with caps placed on interest deductions so that the U.S. Treasury would see a net gain on the deal. In the end, the need to infuse the U.S. Highway Trust Fund without raising taxes—an impossibility in the current political climate in the U.S.—may be the deciding factor.

Image made with help and help from Shutterstock.

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Comments

Lee Dronick

I would support that on the condition that the offshore tax loophole is closed.

palenoue

Will there be cards from Hallmark for this new holiday?

Lee Dronick

  Will there be cards from Hallmark

There are apps for that. smile

skipaq

Lee, I don’t believe that this is a US tax loophole.

Lee Dronick

Maybe not Skipaq. I was thinking about people putting money in the offshore tax havens.

D R

I hope they don’t do this, because it ONLY helps the very largest companies, with the most in profits avoid paying their fair share, when everybody else still has to.

And it just encourages them to keep doing the same, park the money offshore until bonus day comes, where they get to rolls in all the extra cash, while smaller companies get to pay the regular rate all the time.

They need to shut down the loopholes Apple and the other multinational corporations are using to skip paying taxes.

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