Bush Campaign Lies
Monday, March 29, 2004
Bush Campaign Lie #15: John Kerry is Proposing a Tax Holiday for 'Benedict Arnold' Corporations
So lied Dick Cheney in a speech today at the U.S. Chamber of Commerce. Look for this lie to enter the 'Kerry Flip-Flops' showcase soon.
Here's what Cheney actually said:
"Now, just in time for the campaign, Senator Kerry is proposing what some are calling a tax reduction for businesses. Senator Kerry's proposal is inconsistent with even his own campaign positions. After attacking what he described as, quote, 'Benedict Arnold' companies on the campaign trail, Senator Kerry is now proposing to give them a tax holiday."Kerry has used the term 'Benedict Arnold' corporation a number of times to refer to companies who set up shell operations in a tax haven --- usually a tiny island nation which charges little or no corporate income tax --- simply to avoid paying U.S. taxes. Or worse, they actually transfer significant numbers of jobs to offshore locations to get a two-fer: they avoid paying U.S. taxes, and they get a break on labor costs.
How do they avoid paying U.S. taxes? Current U.S. tax law allows companies earning income overseas to defer paying tax on that income until it is repatriated to the U.S. So by setting up overseas operations in a low- or no-tax country, a corporation can avoid paying almost all of its taxes. But if the shareholders of the company live in the U.S., then they are basically getting a free ride, and not paying their fair share of taxes: hence the term 'Benedict Arnold'.
The plan Dick Cheney is referring to would close this loophole:
John Kerry is proposing the most sweeping simplification of international taxes in over forty years: eliminating deferral so that companies pay taxes on their international income as they earn it rather than being allowed to defer taxes.Kerry plans to use the extra income obtained from former 'Benedict Arnolds' --- an estimated $12 billion a year --- and use it to lower the overall corporate tax rate, from 35% to 33.25%. But if Kerry were to enact this legislation tomorrow, an estimated $639 billion in tax-deferred income already overseas would never come back into the country. Thus, as an incentive for companies to bring that money home, Kerry would provide a one-year window during which that money could be repatriated at a 10% tax rate. And this, no doubt, is the 'Tax Holiday' to which Cheney is referring. But it's a lie. Without the one-year window, that money would never be repatriated, meaning that the companies would pay zero tax on it. And moving forward, businesses who have played by the rules will get some tax relief, while the 'Benedict Arnolds' will see their taxes rise from something negligible to 33.25%. Some holiday.
