CONGRESS English tax-break bill addresses outsourcing

The one-year tax break is supposed to provide a major economy boost.
By HAROLD GWIN
VINDICATOR SHARON BUREAU
SHARON, Pa. -- U.S. Rep. Phil English of Erie, R-Pa., says giving a tax break to U.S. companies operating overseas is the key to persuading them to bring their profits back home.
That's what his bill, the Homeland Investment Act of 2003, would do.
English was in Sharon on Monday to discuss the terms of his proposal, which has 43 co-sponsors so far, including 15 members of the House Ways and Means Committee.
A similar piece of legislation passed the Senate last year. English is hopeful that the Senate bill and his bill will soon make it to a conference committee to reach a compromise to be enacted into law.
He said his bill is a short-term plan to boost the economy by persuading U.S. companies operating overseas to bring their earnings back to the United States.
"I am stumping for a common-sense bill that would pump $300 billion into the U.S. economy, over $15 billion in revenue to the government and create 666,000 jobs in the first year," English said.
It's an answer to outsourcing by domestic companies that have found it cheaper to do business overseas, he said.
Offers one-year break
Under current law, U.S. companies must pay tax on foreign subsidiary earnings when they bring those earnings back to the United States. That tax stands at 35 percent, less any taxes they have to pay abroad.
They can avoid the domestic tax by simply leaving their money overseas and investing it there, English said.
Under his plan, companies would be offered a one-year break on that tax.
The new rate would be just 5.25 percent on foreign earnings.
Giving them a short-term tax break will encourage companies to quickly invest that money in their operations here, providing a boost to the domestic economy, he said.
He cited studies by JP Morgan Chase and Dr. Allen Sinai of Decision Economics Inc. that said the bill would result in $300 billion of capital flow into the United States with $15 billion of that going to the U.S. Treasury.
A $300 billion influx of cash would have a major positive impact on the economy, with the studies suggesting the move would create 666,000 jobs in this country by 2005, English said.
Cites support
There is no direct provision in his legislation to require companies to spend their earnings on improving domestic facilities, but English said international companies have shown strong support for his plan.
As a practical matter, companies use capital to reinvest. The money could also be used to improve depleted employee pension plans, he said.
English said his proposal is "the best possible response to outsourcing" by allowing companies to return "stranded" foreign earnings to the United States.
gwin@vindy.com