U.S. corporate tax rates are too high, and U.S. infrastructure needs an upgrade. Why not kill two birds with one stone?
It seems like a win-win: tech firms like Apple GOOG get to bring home piles of cash parked overseas, while America gets to upgrade its infrastructure. But can it happen?
Take a listen to the short video above in which Sen. Chuck Schumer (D-NY) describes the bipartisan tax reform he’s been working on with Sen. Rob Portman (R-OH).
“The companies make a fortune overseas. They’d rather bring the money back here,” says Schumer, explaining a proposal that would let companies temporarily avoid the high U.S. corporate tax rate.
That rate, which is 35%, is considerably higher than other Western countries, and has created an incentive for tech companies to attempt exotic tax gimmicks like the “double Irish” and to just leave the money overseas. The amounts at stake are staggering. As Fortune reported earlier this year, Apple’s overseas cash hoard is now at $158 billion.
While Republicans support cutting the tax rate to be more in line with other countries, many Democrats balk at the idea of giving corporations a break. That is why the Schumer/Portman compromise plan, which still lacks a full set of details (a similar idea floated in May by Senators Barbara Boxer (D-CA) and Rand Paul (D-KY) called for a one-time 6.5% tax holiday), would use part of any tax receipts from repatriated money for upgrading infrastructure.
“So a lot of the Democrats who don’t want to lower the corporate rate will be brought on board because [the plan] will fund highways,” said Schumer, adding the tech industry is fully behind the plan. “They love this idea. I’ve talked to Tim Cook about it”
Unfortunately, just because an idea is popular and bipartisan doesn’t mean it will make it through Congress. While a New York Times report suggested the Schumer-Portman plan was gaining steam in July, the Senate is now in summer recess and, as presidential primary season heats up, it will be increasingly difficult to pass major laws of any kind.
The upshot is U.S. companies may have to wait until after the 2016 election for any progress. In the meantime, they will keep turning to controversial gimmicks like inversions or, as e-commerce marketplace Etsy just did, exploit the same old Irish loopholes.
Sen. Schumer made the remarks on July 31, when he dropped by Fortune to discuss New York tech policy, and how he is teaming up with his famous cousin, Amy (of “Trainwreck” fame), on a gun control initiative.