Through a single piece of legislation, Sen. Rand Paul is hoping to cut a corporate tax and get more revenue for transportation projects.
Here’s how: When American companies make money overseas and put it in foreign banks, they have to pay a tax to bring the money back to the U.S. Paul is sponsoring legislation that lowers the tax companies pay to transfer foreign profits to America from 35 percent to 5 percent. Many of those companies keep that money overseas instead of paying the 35-percent tax.
The new tax revenue generated under Paul’s proposal would be put into a transportation fund, which could benefit projects including the Ohio River Bridges and the Brent Spence Bridge in Northern Kentucky.
A lot of money is sitting overseas, and a lower tax rate would entice companies to bring it home, Paul spokesman Dan Bayens said.
“U.S. companies today hold ($)2.3 trillion of their profits overseas,” Bayens said. “And what his legislation would do is bring some of that money or entice some of those companies to bring their money back to the United State by lowering the repatriation rate to 5 percent from 35 percent.”
A similar break was offered temporarily in 2005. The National Bureau of Economic Research found it mostly benefited the largest companies holding funds overseas. The New York Times reported that many companies then shifted production out of the country in anticipation of another drop in the tax rate. The Times reported:
This money comes from overseas operations and in some cases accounting maneuvers that shift domestic profits to low-tax countries. The study concluded that the program “did not increase domestic investment, employment or research and development.”
Indeed, 60 percent of the benefits went to just 15 of the largest United States multinational companies — many of which laid off domestic workers, closed plants and shifted even more of their profits and resources abroad in hopes of cashing in on the next repatriation holiday.
Under Paul’s bill, the Department of Transportation would control the fund and direct money to projects it deemed necessary under the bill.