The call was framed as part of the need for comprehensive
corporate tax reform, with Romney and President Obama this week
outlining divergent economic plans, which Obama described as
"two fundamentally different views between what direction
America should take".
"We have this repatriation tax," said Romney. "If you make a
lot of money in some other foreign country and you want to
leave it there, we don't tax you. But if you want to bring it
home, to invest here, then we do tax you, up to 35%. That
doesn't make a lot of sense to me. If you want to bring your
money home, please bring it home."
But previous repatriation holidays have not lead to increased investment and
job creation. Instead, companies hoarded the money, or paid
higher dividends to their shareholders. This does not worry
"And I know some people say, "Yeah but companies might put
it out as dividends." Well that's OK too," he said.
At present, the US uses a worldwide system of taxation. But,
as Bob McIntyre from Citizens for Tax Justice points out, the
system is actually more accurately described as a hybrid of the
pure worldwide system and the territorial system.
"The US technically has a worldwide tax system in which all
profits of US corporations are subject to US taxes, but it
undermines this rule by allowing taxes on offshore profits to
be deferred until those profits are brought back to the US
(repatriated). Often, these offshore profits are never
repatriated," said McIntyre.
Romney's comments came just days before the Joint Committee
on Taxation (JCT) released its report on the revenue proposals
contained in President Obama's fiscal year 2013 budget
proposal, which was submitted to Congress in February.
The report outlines Obama's proposals and compares them with
existing law, as well as providing analysis of related policy
Though there is widespread disagreement over how best to
pursue effective tax reform, many stakeholders believe a corporate tax rate reduction should be
effected before further reform is dealt with.
"Reduce the rate as a first step and that allows you to
remove some of the unnecessary and unwanted provisions," said
Bob Rinninsland, attorney at the Ruchelman Law Firm. "We were
ok until [former president Ronald] Reagan and then we took the
European route ending up with a lot of tax law, but not a lot
Rinninsland argued that a rate reduction is the "most
visible first step" and said it would serve as a statement of
intent that the US is pursuing tax simplification.