Cross posted from The Stars Hollow Gazette
A corporate tax holiday? Does Sen. Chuck Schumer (D-NY) seriously think that by cutting the tax rate on overseas profits for US Multinationals from 35% to 5,25% it will encourage these companies to create jobs here? That is what Schumer, our elected Wall St. lobbyist, is pushing despite the fact that the last time this was done in 2005, most of the money went to shareholders and executives (pdf) in the form of dividends and stock buy backs. We all know how many jobs were created, zero. Indeed, the companies that profited the most actually laid off more workers and cut back production in the US. We all know how many jobs were created, zero. Indeed, the companies that profited the most actually laid off more workers and cut back production in the US. As to increased revenue, short term it might bring $50 billion into the Treasury but over a ten year period there would be an $80 billion loss.
In his Rolling Stone blog, Matt Taibbi explains how this is just another “con” by corporation lobbyists:
Here’s how it works: the tax laws say that companies can avoid paying taxes as long as they keep their profits overseas. Whenever that money comes back to the U.S., the companies have to pay taxes on it.
Think of it as a gigantic global IRA. Companies that put their profits in the offshore IRA can leave them there indefinitely with no tax consequence. Then, when they cash out, they pay the tax.
Only there’s a catch. In 2004, the corporate lobby got together and major employers like Cisco and Apple and GE begged congress to give them a “one-time” tax holiday, arguing that they would use the savings to create jobs. Congress, shamefully, relented, and a tax holiday was declared. Now companies paid about 5 percent in taxes, instead of 35-40 percent.
Money streamed back into America. But the companies did not use the savings to create jobs. Instead, they mostly just turned it into executive bonuses and ate the extra cash. Some of those companies promising waves of new hires have already committed to massive layoffs..
According to Forbes, Chuck Schumer has garnered the blessings of some “left” Democrats by pairing it with a job creating infrastructure program. Former SEIU president Andy Stern and Sen. Kay Hagen (D-NC), who voiced her support at a Third Way breakfast, have endorsed the idea and the multi-nationals have already sent out their dogs to push it:
While the repatriation holiday alone is a non-starter for most Democrats, pairing it with an infrastructure program could marshal labor support. It’s an approach backed by former Service Employees International Union president Andy Stern, who’s emerged as the most vocal proponent of the tax holiday on the left.
The team of corporate heavyweights behind the lobbying push for the holiday — including Apple (AAPL), Cisco (CSCO), Duke Energy (DUK), Google (GOOG), Kodak (EK), Microsoft (MSFT), Pfizer (PFE), and Oracle (ORCL) – has shown some success softening up Democratic opposition recently. Last week, the centrist Democratic think tank Third Way hosted a breakfast on the topic that featured Sen. Kay Hagan (D-N.C.). “A repatriation holiday can encourage economic activity at a fraction of the cost of recent fiscal policy,” Hagan said in her prepared remarks.
My head hurts.