Prometheus 6   

We haven't cut corporate taxes enough, oh, no…

Senate Panel Backs Bill to Give Tax Windfall to U.S. Companies
By EDMUND L. ANDREWS

WASHINGTON, Oct. 1 -- American corporations that have deferred taxes for years on the profits they made overseas could be in line for a huge windfall from Congress.

Hoping to bring more investment to the United States, the Senate Finance Committee approved a bill on Wednesday that would give a one-time tax holiday to companies that have accumulated as much as $400 billion in foreign profits on which they have yet to pay American taxes.

American companies can usually defer paying taxes on foreign profits as long as they keep the money outside the United States. Much of that money is reinvested in foreign operations, and some is parked in passive investments.

The Senate bill, which is part of a much broader bill to overhaul laws on international corporate taxation, would let companies bring those profits back and pay a tax rate of 5.25 percent.

Supporters say the six-month tax holiday could lure as much as $300 billion back into the United States, which in turn would increase investment and create jobs.

To press their case, companies like Hewlett-Packard have formed a broad coalition that includes the likes of Eli Lilly, Merck, Intel, Sun Microsystems and Dell Computer.

Among the coalition's main lobbyists are Bill Archer, the former chairman of the House Ways and Means Committee, and his former chief of staff, Donald Carlson.

"The question is, Do we want this money invested in equipment and plants in Egypt or do we want it invested in the United States?" Mr. Carlson said. "To get this much bang for the buck is a rarity."

But many tax experts, including top tax officials in the Bush administration, say the move would be a mistake because it would validate the strategies of companies that spent years sheltering the overseas profits.

"The company that left Louisiana is going to pay a 5 percent tax on the widgets they make overseas, and the company that stayed in Louisiana is going to pay a 35 percent tax," said Senator John B. Breaux, Democrat of Louisiana. "If that isn't an incentive to leave, I don't know what is."

Critics also warn that there is no guarantee that the companies will invest their repatriated profits in new factories or larger work forces. Indeed, Republican lawmakers defeated an amendment offered by Mr. Breaux on Wednesday that would have required companies to reinvest their foreign profits in things like new equipment.