FLASHBACK: Corporations Used 2004 Tax Holiday To Repatriate Billions, Then Laid Off Thousands Of Workers
"FLASHBACK: Corporations Used 2004 Tax Holiday To Repatriate Billions, Then Laid Off Thousands Of Workers"
A slew of multinational corporations — who have crafted a campaign known as “WinAmerica” — are lobbying hard for Congress to enact a tax repatriation holiday, which would allow multinational corporations to bring money they have stashed offshore back to the U.S. at a dramatically lower tax rate. (Usually corporations pay the statutory 35 percent rate on repatriated earnings.)
The campaign has picked up a bit of steam, with Rep. Kevin Brady (R-TX) introducing legislation this week to enact a tax holiday. Two Republican 2012 hopefuls — Tim Pawlenty and Mitt Romney — and House Majority Leader Eric Cantor (R-VA) have all endorsed the idea. Their justification for supporting it is that corporations will use the repatriated money to invest domestically and create jobs.
However, the Congressional Research Service looked at a repatriation holiday approved by Congress in 2004 and found “little evidence exists that new investment was spurred.” In fact, many of the largest companies that took advantage of that holiday wound up cutting tens of thousands of jobs over the subsequent two years, as this table shows:
|Corporation||Amount Repatriated||Layoffs In 2005-2006|
Even companies that actually used the money for domestic investment, like Dell, wound up spending their new-found windfall on projects that they were going to undertake even in the absence of a tax break. As MIT economist Kristen Forbes explained, “[Dell] said part of the money would be brought back to build a new plant in Winston-Salem, N.C. They did bring back $4 billion, and spent $100 million on the plant, which they admitted would have been built anyway.”
Overall, corporations used 92 percent of the money they brought back under the tax holiday to enrich their executives and buy back their own shares, not to invest in job creation. Several of the companies in the WinAmerica coalition already pay exceedingly low taxes due to the various loopholes and credits in the corporate tax code and through their use of offshore tax havens. The Joint Economic Committee found that a repatriation holiday would cost $78.7 billion.