WASHINGTON — A huge, one-time tax break to lure back about half of the $1.4 trillion in earnings held abroad by U.S. companies would produce nearly 3 million jobs nationwide over two years, according to a study by the U.S. Chamber of Commerce.
A repatriation tax break, which would temporarily reduce the tax rate on foreign earnings to 5.25 percent from 35 percent, has been pushed by the chamber and major U.S. corporations, including Cisco Systems Inc. and Oracle Corp.
Many Republicans support the move, as do some Democrats, who have been pushing President Barack Obama to include such a proposal in the $300 billion jobs package he will announce Thursday.
The U.S. Conference of Mayors — headed by Los Angeles Mayor Antonio Villaraigosa, a Democrat — called for a foreign earnings tax break as part of a job-creation plan it released Friday.
Despite the bipartisan support, a spokeswoman for Treasury Secretary Timothy F. Geithner reiterated Wednesday that the administration opposes a repatriation break that is not part of broader corporate tax reform.
Many liberals argue that a repatriation break only encourages companies to hold more money abroad to wait for another tax holiday. A similar break in 2004, they said, didn’t create the promised jobs; companies instead used the windfall to reduce debt, make purchases or pay shareholders.
The chamber study, prepared by conservative economist Douglas Holtz-Eakin, said the break would encourage companies to bring money back to the U.S. at the lower rate, boosting the economy and hiring.
Holtz-Eakin, a former top economic advisor to President George W. Bush, estimated the move would increase the nation’s total economic output by $360 billion over two years and would add 2.9 million jobs — all for much less cost than another government stimulus program.
According to an estimate this year by the congressional Joint Committee on Taxation, a repatriation break would lure $700 billion in foreign earnings back to the U.S., $500 million more than would come back in the next 10 years. The federal government would lose about $80 billion in additional tax revenue in that case.