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Prall: Cut the loopholes, fill the potholes

BY JACOB PRALL | FEBRUARY 03, 2015 5:00 AM

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The Obama administration has a lucrative tax loophole in its cross hairs.

For decades, the largest corporations have avoided paying U.S. taxes on profits overseas so long as the money doesn’t pass through the United States. The money is simply stashed in low-tax areas around the world.

According to the BBC, two taxes are being proposed: an immediate, one-time tax on the estimated $2.1 trillion held by U.S. corporations overseas at a rate of 14 percent and an annual tax of 19 percent on future profits. The current domestic corporate tax stands at 35 percent, nearly twice the proposed tax.

The tax would help remove the incentive companies have to keep their profits out of the United States. It would instead incentivize the creation of jobs and general spending in the States.

Why should U.S. corporations pay tax on foreign profits? Well, U.S. corporations benefit greatly from U.S. corporate welfare, public education, and infrastructure. Speaking of, that’s exactly what the proposed tax would pay for.

The one-time 14 percent tax on current holdings would generate an estimated $238 billion of federal revenue. The revenue would be put to work in a massive U.S. infrastructure bill, repairing and building roads, bridges, and public transport.

The United States faces a much-needed infrastructure overhaul. Potholes, unmaintained bridges, and severe congestion plague the people and corporations of America. A bill to address these issues is long overdue and could see the light of day should the proper spending be appropriated.

Unfortunately, it is unlikely new roads will be coming anytime soon.

The tax would be the single largest contributor of funding to the infrastructure bill. The tax also targets the wallets of the largest U.S. corporations and thus, the largest donor bases. Congress is not expected to pass the proposed tax. With re-election on the mind, it’s never the time to start taxing your biggest supporters.

The issue of ballooning campaign spending knows no political party lines; it is universal. Waves from the Citizens United case are still being felt in the everyday politics of Capitol Hill.

This is not the first time a one-time tax on foreign profits for infrastructure has been proposed. Last year, then-Rep. Dave Camp, R-Mich., offered a similar plan to no avail. Congress as a whole did not give it much regard. With the president’s backing, the idea has taken new life.

Fixing our infrastructure and tax reform are both bipartisan issues, and progress appears to be possible. Unlike the White House, the Republicans of Congress support the idea of infrastructure but offer no funding option. Because of its inherent logic, Congress is having a difficult time formulating legitimate objections to the proposal. On “Meet the Press,” Rep Paul Ryan, R-Wis., admitted that tax and infrastructure reform are needed. He branded the proposed tax as “envy economics,” however.

Inciting the idea of class-warfare may be the only way to throw the proposition under the bus (and into a pothole). The reality of the situation is much simpler — there is a loophole that needs closing. There is a serious infrastructure problem that requires a source of funding. This isn’t “top-down” redistribution; this is simply paying the bills and making sure the United States remains competitive on the world stage of transportation.


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