Rahm Emanuel has a proposition. A grand one, for big business, big unions, and Congress: let a corporate income tax holiday pay for a national infrastructure bank.
Let multinationals bring their money home -- the money that's parked overseas, dodging Uncle Sam's corporate income taxes -- and the federal government can use some of it to pay for the infrastructure bank, the newly minted mayor of Chicago says.
Unions, big corporations, and potentially members of both parties: a virtual rainbow coalition may be assembling in favor of the infrastructure bank. But corporate watchdogs charge there's no difference between a tax holiday with a bank and a tax holiday without one.
Under Emanuel's plan, which he is developing with Rep. Rosa DeLauro (D-Conn.), the bank would build the bridges, roads and mass transit that America has been neglecting for decades. As these structures rust and fall apart, oftentimes nothing new is being built in their place. Yet money to improve infrastructure money will not be easy to come by in the midst of a protracted deficit debate; by including the tax holiday, Emanuel's proposition aims to win over Republicans leery of adding to the deficit.
The idea for the bank is not new -- former Service Employees International Union President Andy Stern mooted it in an op-ed piece months ago -- but it seems to be gaining renewed attention. Reed Hundt and Thomas Mann wrote about it in the Washington Post last week, Emanuel treated it as his own in a speech to the U.S. Conference of Mayors on Saturday, and now Sen. Chuck Schumer (D-N.Y.) is feeling out the Senate.
For proponents, the hope is that the proposition could unite Democrats in the Senate and Republicans in the House. Emanuel said he thinks his grand compromise "brings the parties together."
The specific terms of the tax holiday, however, would be critical. Some Democrats don't want to give multinationals a free pass, and Republicans don't want to be too hard on corporate America.
Without some sort of deal, it's possible that money could continue to linger offshore -- parked in anticipation of a better deal from a different Congress. That has been the situation since 2005, when another tax holiday was declared, premised on the idea that it would create jobs; it didn't.
Critics of any sort of tax holiday say that the infrastructure bank is just the latest twist on corporate blackmail.
"Every one of these amnesties encourage greater holding offshore and Congress is being irresponsible even to say they are thinking about it," said Calvin Johnson, a professor at the University of Texas School of Law who specializes in tax law.
Former SEIU chief Andy Stern disagreed. "The problem is the money hasn't come back, there's no reason to believe it will ever come back," said Stern, now a senior fellow at Georgetown University Public Policy Institute.
"Details are appropriate and important -- you know, what's the tax rate? -- but we're now in the right framework," he argued.
In his speech to the mayors, Emanuel said he would like to see the tax rate lowered to 10 or 15 percent, down from its current 35 percent, for the tax holiday. The money the government raises from those taxes would then be directed only to the infrastructure bank, ensuring, in his view, that it would actually be used to create jobs.
Such a cut on the corporate income tax rate, however, might not sit well with small businesses, who can't use creative accounting to hide their profits overseas like the multinational corporations. And a cut to 10% might not be steep enough to win over Republicans in the House, who have been talking about taxing repatriated income at a rate in the low single digits. In the Senate, Schumer has reportedly suggested a 5% rate.
Rep. DeLauro told HuffPost that she's working with Emanuel to find a balance, and she is hopeful that Republicans can be convinced to sign on to their plan. DeLauro said she has been working on plans for an infrastructure bank for 14 years, and found the recent discussion of the idea "very encouraging."
"The concept of an infrastructure bank has wide support -- from the U.S. Chamber, from labor unions, from a whole bunch of people in between," she said.
Robert McIntyre, director of Citizens for Tax Justice, isn't one of those people. He said there was "no substantive difference" between a straight tax holiday and one that was combined with an infrastructure bank. "It's just somebody's wacky idea that the problem the world faces today is a lack of capital. Our problem is there's not enough consumer demand. The government should be out there shoving money out the door and stimulating the economy."
"This bank is going to be just another bank -- they could have given the money to SunTrust, you know?" he said.
DeLauro said capitalizing the bank via a tax holiday was not her first choice, but she thought that it would be a good approach in the GOP-controlled House.
"If we are going to have another repatriation holiday, the federal government should use the incoming revenue to capitalize a national infrastructure bank, and we do know that such an entity creates jobs, long-term economic growth," DeLauro said.
Tying the repatriation to a larger reform of corporate income taxes is also critical in her mind. "Any repatriation effort has got to be a bridge to broader corporate tax reform. We have to close tax loopholes," she said.
Her infrastructure bank plan would leverage money from corporations and the federal government to create projects that include public-private partnerships. Because of the federal backing, loans for the projects could be issued at low rates.
Such arrangements are common overseas; some have pointed to the European Investment Bank as a model for what could be created here.
The United States has relatively fewer infrastructure projects that are operated as public-private partnerships, and any ventures that smacked of privatization might prove controversial. A privately owned toll road created with lending from the infrastructure bank, for instance, might charge a high rate to pay off its government loan. Criticism might also arise if the arrangement's big winners are the same multinationals benefiting from the tax holiday, as opposed to small businesses.