Until recently there appeared to only be two options for solving our financial crisis.
Washington could either continue its wasteful spending and cover the bill by increasing taxes or make large cuts that could deprive our economy of revenue it has used to sustain itself.
That is until Paul Ryan, Chairman of the House Budget Committee, proposed a budget that is refreshingly honest with the American people about the dire fiscal path Washington has guided our country down for too long. His plan shatters the common perception in Washington that the government must continue its wasteful spending as a means of life support for the U.S. economy.
One of the boldest steps Mr. Ryan takes to address our long term economic success is reducing the top tax rate for both individuals and companies to 25 percent. Lowering the tax rate will remove the greatest barrier that exists today between the private sector and job growth. The only thing I would add to the Chairman’s plan is tax relief that would encourage bringing home more than a trillion dollars of US capital that could be used to help create American jobs and net $50 billion in extra tax revenues that our economy would otherwise never receive.
Instead of relying on taxpayer dollars to stimulate the economy as we have during the recession, we should encourage companies to draw upon the cash they’ve earned overseas to use back here at home. Innovative companies such as Qualcomm, Life Technologies, Microsoft, Apple, and Cisco Systems have each felt the constraints levied on them by the U.S. repatriation tax. These great American companies – as well as many others that range in size, scope, and industry – are reluctant to draw on their cash reserves overseas because bringing those assets home could mean getting hit with a 35 percent statutory tax rate.
In March, I introduced The Job Creation and Innovation Investment Act of 2011 (H.R. 1036). This legislation would establish a zero percent tax rate for funds brought back to the United States that are invested in research and development, new manufacturing and facility expansion. If companies wish to use the money they bring back entirely at their own discretion then they will be subject to a 5.25 percent nominal tax rate, which still amounts to a nearly 30 percent reduction.
Instead a disturbing trend is emerging in which US companies accumulate foreign assets overseas and yet still borrow here at home thanks to bedrock interest rates. Should interest rates begin to rise this could increase costs for these companies and further endanger our economy while denying credit to small businesses and other Americans.
According to the US Treasury, forty cents out of every dollar the government spends today is on loan. We are not just borrowing from China; we are stealing from our children and grandchildren. Paul Ryan’s plan creates a sustainable future for the next generation of Americans. My proposal offers the private sector an opportunity to begin the hard work now, bring capital home immediately, and create American jobs with American money.