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An army of lobbyists on Capitol Hill is trying to convince Congress that after stashing nearly $1.4 trillion offshore to avoid paying U.S. taxes, corporations should get a massive tax discount for bringing the money back to America.
We've done this before.
In 2004, Congress gave corporate America a "repatriation holiday" on the promise of job creation. Yet rather than hiring workers, the firms that benefited most actually shed jobs, bought their own stock to boost the price, and increased executive pay. Anticipating the next holiday, they then shifted even more profits offshore. Small businesses and ordinary taxpayers who can't afford high-priced attorneys or accountants were left to foot the bill.
More than 80 of America's largest 100 publicly traded companies make use of offshore tax havens, which cost U.S. taxpayers $100 billion a year in lost revenue. Some of these subsidiaries are nothing more than post office boxes. In fact, 18,857 "corporate headquarters" are registered at a single address in the Cayman Islands. General Electric paid zero dollars in U.S. taxes on its American profits in 2010.
Here in Pennsylvania, to make up for tax dodgers, the rest of the state's individual tax filers had to pay more than $4.4 billion in 2010, according to a study by Pennsylvania Public Interest Research Group. That breaks down to each taxpayer paying on average an extra $464. If a corporation benefits from American education, infrastructure, and national security, it should pay the taxes it owes to America.
A tax holiday allowing corporations to pay 5 to 8 percent on profits they've kept offshore instead of the normal 35 percent would only reward companies that have shirked their tax responsibility.
The vast majority of U.S. corporations would not benefit at all. A study recently released by the Senate Permanent Subcommittee on Investigations found that just 0.015 percent of corporations could take advantage of the repatriation holiday in 2004. Pharmaceutical and high-tech giants accounted for nearly half of the returned funds.
While a tax holiday is wrong on principle, research shows that it also doesn't help the economy.
The Senate study found that the 15 companies that brought back the most money in 2004 shed nearly 21,000 jobs. The companies didn't use the extra cash to invest in research and development either. According to the study, these same top firms markedly increased stock buybacks and upped executive pay by nearly 60 percent in the two years following the tax holiday.
The only clear effect the last tax holiday had on the economy was to encourage companies to shift even more of their profits offshore. According to a study by the Congressional Research Service, the nonpartisan research arm of Congress, firms that took the most advantage of the tax amnesty last time have increased the amount of cash stashed offshore by 81 percent.
One of the strangest things about the push for a tax holiday was the 160-plus corporate lobbyists pressuring the supercommittee, which was supposed to cut the deficit. They were undeterred by the nonpartisan Joint Committee on Taxation's finding that a corporate tax holiday would add at least $42 billion and as much as $78.7 billion (depending on the tax rate) to the deficit over the next 10 years.
The facts speak for themselves. A tax holiday is nothing more than a giant giveaway to corporations. It will encourage companies to engage in more tax-dodging and force small businesses and individuals to pick up the tab. Congress and taxpayers must not get fooled again.
Contact Alana Miller via www.pennpirg.org.
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