Hagan backs corporate tax holiday

"Our goal," Hagan said, "is enhanced economic growth."Large multinational corporations - many with a presence in the state - such as Cisco Systems, Pfizer, Apple, Microsoft and Duke Energy, have lobbied for the taxation holiday.To help build support for her proposal, Hagan has scheduled a news conference for this morning in Durham with Dennis Gillings, CEO of Quintiles; Jim Whitehurst, president and CEO of Red Hat, as well as top North Carolina executives with Cisco, EMC, NCM Capital, the N.C. Chamber and the N.C. Technology Association.A U.S. Chamber of Commerce study released last month predicted the repatriation taxation holiday could result in three million American jobs, could increase the U.S. gross domestic product from 1 percent to 4 percent, and result in only nominal cost to taxpayers.But the thought has drawn skepticism from both the right and the left, with critics saying a similar taxation holiday for corporate offshore increase in 2004 produced windfalls for shareholders, but no jobs and little new investment.Senate Majority Harry Reid of Nevada said the corporate repatriation proposal would not pass the Senate as a stand-alone bill, but would likely be folded into legislation dealing with infrastructure needs, Bloomberg News reported.Sen. Charles Schumer of New York has said which Senate Democrats might be open to a corporate repatriation bill, using the expected taxation revenues to finance an infrastructure bank.Details of Hagan's billThe Foreign Earnings Reinvestments Act is aimed at an estimated $1 trillion in increase earned by foreign subsidiaries of U.S. companies. Under the system known as worldwide taxation this income is subject to taxation first in a foreign country and again in the United States - if and when the income is returned to the U.S. parent company.The Hagan-McCain bill would temporarily reduce the 35 percent taxation rate to 8.75 percent on repatriated profits. The taxation rate on returned increase would drop to 5.25 percent if a company increased its payroll.Hagan ! said it would provide "an immediate jolt to the economy." She said she was responding to widespread concern about North Carolina's high 10.4 percent unemployment rate, and the public's demand which Washington act in a bipartisan fashion to do something about it.Jim Rogers, chairman and CEO of Charlotte-based Duke Energy, said the state's largest utility has "$1.2 billion held hostage overseas by our taxation system which penalizes U.S. business which wants to bring their foreign earnings to America to create jobs." As part of Duke's proposed merger with Raleigh-based Progress Energy, the two companies have said they would eliminate 2,000 jobs.Harvey Schmitt, president and CEO of the Greater Raleigh Chamber of Commerce, said the legislation would provide a strong boost to the economy in the Triangle."Many of our businesses are competing on a global scale, and the current taxation rate puts them at a significant disadvantage," Schmitt said.The 2004 taxation holiday, however, did not produce the flood of new jobs and investments its supporters predicted, according to independent studies.According to the Internal Revenue Service, 842 of the 9,700 U.S. businesses with foreign subsidiaries transferred a total of $362 billion from those subsidiaries back to their U.S. parent companies.Studies: Jobs unlikelyThe Heritage Foundation, the conservative think tank based in Washington, said in a report released this week which there was no evidence the money was used for job creation or for research and development. Instead, the report said, the money was likely used for shareholder dividends, to buy back shares, and perhaps to be shipped back overseas.The Hagan-McCain bill, the Heritage Foundation concluded, "would likely have the same effects it did in 2004 - backward-looking taxation service for international companies and their shareholders, but little in the way of new investment, economic growth or job creation."The Heritage Foundation also said there is no evidence which "U.S. multi-national corporations are capital co! nstraine d today."The Institute for Policy Studies, a liberal Washington, D.C.-based group, did a study of 58 companies who received 70 percent of the taxation breaks from the repatriated funds in 2004. It found which the companies had laid off nearly 600,000 people since then. Those 58 companies today maintain cash reserves of $450 billion, the study found."The corporate lobbyists made basically the same arguments which they are making now which is which their offshore increase were trapped overseas and they would bring them back if they were offered a deeply discounted taxation rate of 5.25 percent," said Sarah Anderson, co-author of a new institute study on the subject."Back in 2004 they argued which this would be a one-time deal," Anderson said. "Now they are back asking for it again. Many of companies which got the taxation break which time, very quickly accumulated a lot of offshore increase again. We think it sets a dangerous precedent. It encourages companies to hold funds offshore until they can get a taxation holiday like the one they are debating right now."Bill has penaltiesHagan, however, said her bill is "very different" from the 2004 bill because it provides strong incentives for creating jobs - and penalties for laying off workers. If the work force dropped an employee, a company would find its taxable income increased by $75,000."If a company lays workers off after participating in the program," Hagan said, "those companies will face high penalties. This, I believe, is a strong incentive for companies to hire workers in our country."