The U.S. Senate Tuesday defeated a provision to slash the tax rate on profits that companies bring into the United States from overseas, voting not to include it in the economic stimulus package.
The measure would have temporarily cut the tax rate to 5.25 percent from 35 percent and was aimed at some $800 billion that companies hold abroad, said Sen. Barbara Boxer, a California Democrat who sponsored it.
“At a time when we want to inject dollars into this economy, those dollars are sitting offshore,” she said. “We have tightened the strings on what the companies can do” with their funds.
Boxer and Sen. John Ensign, a Nevada Republican, tried to attach the measure to the approximately $900 billion stimulus package but other senators said it violated budgeting rules.
The measure, which needed 60 votes, fell 18 votes short as a handful of Republicans joined Democrats in defeating it.
A similar measure sponsored by the two senators was approved in 2004 and some $362 billion was repatriated, of which $312 billion qualified for the deduction.
The measure they offered this year would have had additional conditions, requiring companies to spend the money on hiring and training workers, research and development and capital improvements.
The companies would have been prohibited from using the funds for executive compensation or to replace money that designed for that purpose. They also would have been subject to audits to ensure compliance.
However several Democrats said the previous tax break did not create jobs and cited a report that the measure this year could have cost taxpayers some $29 billion.
“It did not increase domestic investment or employment,” said Sen. John Kerry, a Massachusetts Democrat. “The fact is that many of the firms that benefited from this during that period of time laid off workers after they brought that money back. They passed on the benefits to their shareholders.”
(Reporting by Jeremy Pelofsky, editing by Alan Elsner)