Stop rewarding companies that shelter profits abroad

American companies with operations in foreign countries have accumulated more than $400 billion in profits outside the United States, but they haven't had to pay the 35 percent tax that is applied to corporate profits at home. Why? Because the tax code permits the companies to defer payment on such profits so long as the money remains outside the United States.
As a result, there has been a huge increase in the number of American companies with a presence around the world. According to the New York Times, much of the money they make is reinvested in foreign operations, while the rest is parked in other investments.
This isn't a new development. During his 17 years in Congress, James A. Traficant Jr., who represented the Mahoning Valley in the House of Representatives, sought to change the tax laws to end the disparity between foreign and domestic profits.
Traficant, who was expelled from the House and is serving an eight-year sentence in federal prison after being found guilty of 10 criminal charges, failed to get the support of Congressional leaders, but now the issue has been placed on the front burner.
This week, a Senate committee approved a bill that would allow companies to bring their foreign profits to the U.S. and pay a tax rate of only 5.25 percent, according to the Times.
In other words, they would be rewarded for investing in other countries -- at the expense of American workers and the federal treasury. But Republican Senate leaders insist that giving these companies such a break would result in $300 billion being brought to the United States.
No guarantees
Even if that's true, there is still no guarantee that these companies would invest in their domestic operations, thereby restoring the hundreds of thousands of jobs that have been lost.
Giving Hewlett-Packard, Eli Lilly, Merck, Intel Microsystem and Dell Computers, among others, a windfall after they have been able to defer taxes for so many years is unfair and dangerous. It's unfair because companies that stayed home and paid the tax on their profits aren't being rewarded for their nationalistic spirit. And it's dangerous because it would say to corporate America that parking profits to avoid paying taxes is perfectly all right.
The Republican majority on the Senate Finance Committee defeated an amendment offered by Sen. John Breaux, D-Louisiana, that would have required companies to reinvest the profits they bring home in their domestic operations.
Breaux and others are right in contending that it is foolhardy to believe that these corporations will do the right and financially bolster their domestic operations in appreciation for the gift they received from Congress.
Although the bill has been approved by the finance committee, it still must be voted on by the entire Senate. We would urge proponents of a fair tax system to offer an amendment that would provide a tax credit to corporations that agree to bring their profits home and invest in America.
A six-month tax holiday, as contained in the bill, is a slap at those companies that have been loyal corporate citizens.