Berkley straddles party line in quest to promote job growth

By Karoun Demirjian

Friday, July 29, 2011 | 7:31 a.m.

If you're watching Washington try to wriggle a way out of this debt mess, it's hard to imagine Congress getting more contorted; but once this spending debate dies down, it's all but guaranteed to become fully ensnared in the even more tangled web of tax reform.

It's an area in which Nevada Rep. Shelley Berkley, a Democratic member of the tax-minded Ways and Means committee, seems to have developed a taste for straddling the party line, and she's doing it again to encourage companies working overseas to bring their profits back to the U.S., and create jobs.

"There's a lot of talk about repatriation; it goes nowhere on my side of the aisle," Berkley said.

"It made no sense to me to have this money overseas, doing the United States of America no good at all. It also makes no sense bringing the money back and having it spent on dividends, stock options, and bonuses," she said. "So we came up with a plan that there are tax incentives for bringing the money back and using it to create jobs."

Repatriation may seem like a concept that would appeal to Democrats trying to find some way to reverse the flow of outsourcing and capital flight, but it's become a tainted concept since it was last launched in 2004. With little oversight or incentives, many companies used the tax break under that scheme to supplement profits and dividends to benefit shareholders instead of underwrite new employee positions.

Berkley's plan would give a one-time tax break to companies on profits they reinvest in the United States, provided they use that money to invest in job creation, as first reported by Bloomberg News. The effective tax rate on those repatriated funds would be 25 percent.

That's 10 percent below the current corporate tax rate in the U.S. But that's a rate Republicans want to lower in the near future, to 26 percent: a difference that would make Berkley's savings almost moot. Current bipartisan compromise proposals to alter the corporate tax rate suggest an upper threshold of 29 percent.

But the legislation, which is still being finalized, works on a sliding scale: the tax rate on repatriated profits could be as low as 5.25 percent if companies increase their own payroll by 14 percent or more.

It's the sort of proposal that companies like Apple, Google, Microsoft and Pfizer have been actively lobbying for together, as the "WIN America Campaign." The campaign estimates a repatriation tax holiday could bring up to $1 trillion in profits back to American shores.

A cursory search of the Federal Elections Commission database for the 43 companies and business associations that are listed as supporters of the campaign revealed that over the course of Berkley's career, the political action committees of four of the member companies donated a total of $26,000 to her various congressional campaigns. Those companies are Pfizer (a total of $1,000), Qualcomm ($1,000), Brown-Forman ($4,000), and the Consumer Electronics Association ($19,500).

The same cursory search revealed that the political action committees of four companies from the list of WIN America participants have also donated to the campaigns of Republican Sen. Dean Heller, who also used to sit on the Ways & Means committee. His career total is $16,500, and includes donations from Oracle ($1,000), Duke Energy ($2,500), Microsoft ($6,500), Pfizer ($6,500).

The search only delved into PACs, not individual lobbyists for each of the companies listed.

Berkley's model of a repatriation scheme isn't the only one the WIN America campaign, or other companies for that matter, are looking at.

Texas Republican Rep. Kevin Brady also has a repatriation proposal out there that would bring the tax rate on re-Americanized profits down to 5.25 percent, and he has six Democratic sponsors on his bill. Nevada Republican Rep. Joe Heck also signed on as a co-sponsor to Brady's bill on Wednesday of this week, just one day after Bloomberg first reported the news of Berkley's developing proposal.

Berkley admits the companies she's spoken to about her proposal "prefer the Brady approach", but are still "thrilled" about hers because they realize any bill has to get through the Senate, and Brady's chances, she says, are: "Unlikely!"

Still, it's likely an uphill battle for Berkley, especially in her own party.

"I buy the Republican argument that it doesn't do us any good if the money is overseas," Berkley said. "I also understand why so many of the old timers on the Democratic side are not enthusiastic about repatriation: they got burned in the 2000s...that's why we have the jobs aspect."

The dance she's setting herself up to execute is reminiscent of the last tax debate, when Berkley penned a 35 percent estate tax provision that her party hated, but ultimately accepted as part of a larger two-year deal that's set to expire late next year.

"I just sat on it and we kept it alive because I had a feeling that at the end of the year when all agreements are made that it would reappear," Berkley said. "Repatriation alone is going to encounter tremendous resistance in the Senate. It's not going to pass. So they may very well be looking for a fallback position, and I've got it."

When she says "they," Berkley is really talking about her delegation-mate and biggest election booster Senate Majority Leader Harry Reid. He and his chief financial mind, Sen. Max Baucus, are among repatriation's skeptics.

The bill is expected to appeal to several large multinational companies, very few of which have outposts in Nevada.

That's true, Berkley admits, but says there is still an important indirect benefit to the Silver State of advancing a controlled repatriation.

"Nevada, Las Vegas in particular, is not going to recover from the current economic recession until the rest of the country recovers because we need people with jobs and disposable income to come to Vegas," she said. "Unfortunately, given the depth and width of this recession, we'll probably be among the last states to recover. So let's start thinking strategically about how to ensure that the rest of the country recovers and people get back to work, have disposable income, and come to Nevada."

That's not to say there's no local repatriation connection at all: it was gaming companies, Berkley added, that initially introduced her to the repatriation issue. But they would likely not be eligible for the tax holiday she's proposing, she said, because they bring their money back under a different section of the tax code.