A group of multinational corporations (that already pay exceedingly low taxes) have been lobbying Congress to enact what is known as a tax repatriation holiday. Under such a plan, multinational corporations would be able to bring money they have stashed offshore back to the U.S. at a dramatically lower tax rate (instead of the statutory rate that they normally pay to bring back money).
The corporations have united under a campaign called “WinAmerica,” and evidently they are having some effect. Yesterday, Rep. Kevin Brady (R-TX) unveiled a bill that would let corporations repatriate their money at a tax rate of 5.25 percent (instead of the usual 35 percent). Brady said that, “this is about creating jobs, expanding U.S. businesses and strengthening American companies.”
However, when Congress approved a repatriation holiday in 2004, companies used the money to enrich their executives, not create jobs. And according to an analysis by the Joint Economic Committee a repatriation holiday today would cost close to $80 billion in lost revenue:
Representative Lloyd Doggett, a Texas Democrat who is a senior member of the Ways and Means Committee, yesterday circulated an estimate from the Joint Committee on Taxation pegging the cost of a repatriation bill at $78.7 billion. An unsuccessful effort to create a similar holiday in 2009 would have cost the U.S. government about $30 billion over a decade in forgone revenue.
If the money that corporations brought back actually led to job creation, some might consider this worth the cost. But that’s not what happened in 2004. In fact, the Congressional Research Service found that the largest beneficiaries of the last tax holiday cut jobs over the subsequent two years. Hewlett-Packard, for instance, “returned $14.5 billion to the U.S. at a low rate in 2004 and cut its workforce by 14,500 employees in 2005.”
Brady claims that his bill “would impose sanctions for failure to maintain current workforce levels for two years.” For one thing, maintaining current levels is not the same as job creation. But the 2004 holiday also had restrictions on how the money could be used, which turned out to be “completely ineffective,” according to researchers at MIT. Kristen Forbes, who was on President Bush’s Council of Economic Advisers when the last repatriation holiday was approved, told the Boston Globe that the policy “didn’t accomplish the stated goals of bringing jobs and investment to the US.”
The GOP and the corporations behind WinAmerica are trying to convince Congress that providing them with a tax holiday will lead to a flood of domestic investment and job creation. But what they’re really asking for is another Congressionally-provided windfall, making the same mistake a second time for the same reason.