Sacramento CA— Senators Patricia Bates (R-Laguna Niguel) and Janet Nguyen (R-Garden Grove) announced on Tuesday, that they will introduce legislation that could help fund California’s transportation infrastructure with foreign earnings from U.S.-based multinational corporations. Should congressional leaders and the president reach an agreement on the “repatriation” of those earnings, the “Repatriate, Rebuild and Repave” bill would direct any California tax windfall from those earnings towards transportation.
“There are renewed bipartisan discussions about the need to rebuild America’s infrastructure and repatriate foreign earnings back to the United States,” said Senator Bates. “Should those foreign earnings be repatriated, Senator Nguyen and I believe that any state tax windfall should benefit all Californians. There’s no better place to invest that windfall than in fixing California’s deteriorating roads and bridges.”
“For California to have a vibrant economy, one that creates jobs and financial security for all, we must maintain, rebuild and repair the vital infrastructure that keeps everything and everyone moving,” said Senator Nguyen. “Requiring the state to use any tax proceeds from repatriated foreign earnings to fund transportation would help supplement our efforts to re-establish California’s commitment to transportation infrastructure; a priority that has sadly taken a backseat to other programs. I am honored to work with Senator Bates to bring this proposal forward which would benefit all Californians.”
Repatriation is the process by which corporations can bring offshore earnings back to the U.S. at a reduced tax rate or through a tax holiday. U.S.-based multinational corporations do not pay U.S. corporate tax on their foreign profits until the profits are repatriated to the U.S. According to the U.S. Congress Joint Committee on Taxation, the total of “undistributed” and “not previously taxed” foreign earnings of American companies amounted to $2.6 trillion as of 2015.
Senators Bates and Nguyen will introduce their bill in the midst of a growing political consensus that U.S. tax law should be changed to encourage the repatriation of the substantial corporate earnings held outside the country. During last year’s presidential campaign, both Hillary Clinton and President Trump indicated that they wanted to tax some of those earnings and induce corporations to bring them back to the United States. Speaker Paul Ryan, Senate Democratic Leader Chuck Schumer, former U.S. Senator Barbara Boxer and others have favored tax changes that would encourage corporate repatriation.
There was bipartisan support in Congress for an agreement on corporate repatriation in 2015, but progress stalled heading into 2016. There is renewed discussion about the need to rebuild America’s infrastructure and repatriation of foreign profits, which Senators Bates and Nguyen hope will ultimately benefit California.
Any federal agreement on repatriation between the president and congressional leaders would likely provide a windfall of state tax revenue for the State of California. While an amount of such a windfall cannot be determined until federal action is taken, Senators Bates and Nguyen want to make sure that windfall – whether five cents or five billion dollars – goes towards transportation after Proposition 98 and Rainy Day Fund requirements are met.
Specifically, the bill would:
- Direct the Department of Finance to annually provide a revenue estimate of funds derived from repatriation.
- Mandate the Legislature and Governor to direct an amount based upon the prior year estimate provided by the Department of Finance for transportation infrastructure.
- Require a continuous appropriation of funds derived from repatriation to the California Transportation Commission, which would be required to direct:
- 65 percent to the existing Trade Corridors Improvement Fund,
- 30 percent to local streets and roads, and
- 5 percent to public transportation.
- Expire after seven years from the date of the first appropriation.