A group of corporations known as Win America has spent much of 2011 advocating for a corporate tax repatriation holiday, a period of time in which the typical 35 percent corporate income tax usually levied when overseas funds are brought back to the United States would be lowered in an effort to stimulate job creation and domestic investment. Such advocacy has been quickly adopted by anti-tax Republicans, who have made the holiday a key plank in their economic platform.
The only problem with the proposal, however, is that there is little evidence from past holidays that another such reprieve from the repatriation tax would have a substantial impact on actual job creation. A new study conducted by professors at the University of Texas, Syracuse University, and the University of Houston, in fact, found that the 2004 version of a repatriation holiday had little effect on job creation, aiding corporations that already had the means to create jobs while helping “the corporate rich” get even richer, Accounting Today reports:
The new research finds that the AJCA mostly benefited relatively mature companies that had had the means to invest and create jobs all along without the financial boost provided by the legislation. The legislation did not even significantly advance a less intensely promoted purpose of the bill: to enable companies battered by a recent recession to strengthen their balance sheets.
“In essence, the corporate rich got richer, and, although the corporate needy and financially stretched may not have gotten poorer, they derived relatively little advantage from the bill,” said Mills.
“None of the many studies of AJCA has been able to document the major increase in investments and jobs that was the main selling point for the legislation,” she added. “What they found, instead, was an upsurge in corporate stock repurchases, an activity associated with lack of investment opportunities and of primary benefit to company shareholders rather than to the economy as a whole. Our research nails down a key reason for these findings by focusing on whether companies faced financial constraints.”
The study isn’t the first of its kind. The Congressional Research Service examined the 2004 holiday and found that “little evidence exists that new investment was spurred.” A former Bush economic adviser who worked in the administration during the 2004 holiday said it “didn’t accomplish its stated goals of bringing jobs and investment to the U.S.” Many of the companies that benefited most from the 2004 holiday used the money to fund projects that would have been completed anyway, while others stashed even more money overseas with the hope another such holiday would come along in the future. Several of the corporations that benefited most from the holiday actually shed tens of thousands of jobs.
The Congressional Budget Office, meanwhile, studied the idea of a repatriation tax earlier this year and found that it would have a smaller impact on job creation than virtually any of the other proposals put forth in Congress this year.