Tax reforms will hurt innovation, kill golden opportunity to improve infrastructure

President Trump and Republicans in Congress cannot seriously believe allowing U.S. companies to bring home hundreds of billions of dollars stashed abroad at a onetime low tax rate with no strings attached will create substantially more jobs in the United States.

They’re using this fiction to build support for the reforms. But it’s been tried before, and guess what? It didn’t work.

Without attaching some form of conditions — the idea of requiring job creation has been floated in the past — the break just gives more money to shareholders and executive bonuses.

In June, Apple CEO Tim Cook summed up tech’s first priority for tax reform. He told Bloomberg that he believed any new one-time, lower repatriation tax should be mandatory for all companies, with the proceeds going toward upgrading infrastructure.

“I think there are few people who would argue that we don’t need an investment in America,” Cook said.

Agreed. And investing repatriated dollars would benefit corporate America as well as anyone who drives a car, rides transit or relies on water from an aging dam.

All told, U.S. companies have about $1.3 trillion stashed in overseas bank accounts. Bay Area giants such as Apple ($231 billion), Cisco ($65 billion), Alphabet ($50 billion) and Oracle ($45 billion) account for nearly one-third of that.

Keeping the money offshore avoids the 35 percent tax due when it’s brought back. The tax potential for a deal is that in exchange for lowering the tax rate, most of the revenues generated would go toward infrastructure. But neither the House nor Senate tax reform bills includes this trade-off for the national good.

Instead, the money will offset tax cuts for the wealthiest Americans.

The last “reform” that allowed a rate cut for repatriation was in 2004 under President George W. Bush, who used the same job-creation argument Republicans are using now. But companies, including tech, used the money to buy back stock and enrich shareholders. Tech experts expect the same thing to happen under the latest proposals.

While the repatriation proposal is a squandered opportunity, another proposed reform poses a direct and serious threat to tech and other U.S. companies driving the innovation economy:

A last-minute change to the Senate bill affecting how the alternative minimum tax on corporations is applied would essentially kill the benefits of research and development tax credits. Companies now rely heavily on R&D credits to invest in innovation, which may or may not pay immediate returns.

If you doubt the peril of the tax reform bills before Congress, note what tech investors did in the aftermath of the House and Senate votes. While the rest of the S&P 500 jumped by 5 percent during the tax debate, tech stocks dropped by 3 percent.

The Trump administration and its congressional majority talk a good game about helping Americans. But the reforms on the table not only fail low- to upper-middleincome families, they also threaten the very prosperity of U.S. industry.

Except for the very richest of Americans, this tax bill is a disaster. — San Jose Mercury News,

Digital First Media