Lawmakers on the Senate Finance Committee debating the economic stimulus plan rejected Jan. 30 a proposal by Sen. John Ensign to give corporations such as Intel and Microsoft doing business overseas a tax break for reinvesting foreign profits in the United States.
Ensign's proposal would cut the tax rate on foreign profits from 25 percent to 5.5 percent for one year.
"All of the talk has been to provide a timely boost to the economy with a stimulus package that will quickly take effect," Ensign told the Senate Finance Committee. "But much of what we've seen would not provide much help immediately. My amendment would do just that and has proven to do so in the past."
Unmoved, the committee voted against Ensign's amendment. The package approved by the committee includes $151 billion in individual tax rebates and business incentives.
An Ensign spokesman told eWEEK Jan. 31 the Nevada Republican may try to add the amendment when the stimulus plan hits the Senate floor.
"The amendment that I offered today would certainly stimulate the economy, and it would do it quickly through investment and job creation here at home," Ensign said.
Large corporations such as Microsoft, Intel and Hewlett-Packard that operate foreign subsidiaries have been reluctant to bring overseas profits home, Ensign contends, because of the large tax bite.
Ensign's proposal is similar to the provision he authored in a 2004 corporate tax bill. According to Ensign, the provision brought approximately $306 billion back into the United States and that 82 percent of the repatriated earnings went to domestic capital spending, hiring and training new employees and debt reduction. Ensign's proposal specifically bars the reinvested funds to be used for executive salary increases.
"If we lower the tax rate, they would bring the money back [into the U.S.]," Ensign said Jan. 30 during the Senate Finance Committee debate on the stimulus package.
The House on Jan. 29 approved a $146 billion stimulus package negotiated with the White House. At a press conference, House Speaker Nancy Pelosi and Republican leader John Boehner urged the Senate not to add new provisions that could delay getting the legislation to President Bush's desk by Feb. 15.
By hitting that target date, Pelosi and Boehner said, the government could begin sending rebate checks to approximately 111 million Americans by June. The House bill would authorize rebate checks of as much as $600 for individuals and $1,200 for couples. Families with children would receive checks for $300 per child.
The House package also expands investment tax breaks for business and adds capital to the mortgage market by allowing Fannie Mae and Freddie Mac to buy mortgages above the current federal limit.
"It's important that the package not get overloaded," Pelosi warned. "Let's hope that the Senate will take its lead from us and be disciplined."