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Sen. Carl Levin: Tax holiday for big companies failed before

Published 7:09pm Wednesday, October 19, 2011

As Americans continue to worry about jobs and the economy, some lobbyists in Washington are pushing for what they claim is the perfect solution – allowing multinational corporations to bring money from offshore subsidiaries back to the United States at an extraordinarily low tax rate.  They call it a “repatriation” tax break.
Proponents claim the lower tax rate will unleash jobs and investment, but when Congress actually tried it in 2004, the result was just the opposite. Congress allowed them to bring home offshore cash at a one-time-only tax rate of just 5.25 percent – a fraction of what most Americans pay and of the top corporate tax rate of 35 percent.  Proponents promised this special tax break would create jobs.  The legislation was even called the American Jobs Creation Act.
But a two-year study by the staff that of the Senate Permanent Subcommittee on Investigations, which I chair, just found that the companies that took that tax break failed to create new jobs and instead boosted executive paychecks. It was a complete bust.
My subcommittee surveyed 20 major multinational corporations, including the 15 companies that repatriated the most under the 2004 law, and found that the billions in offshore funds weren’t used to hire workers. Instead:
• Despite repatriating more than $150 billion at a reduced tax rate, the 15 multinationals with the biggest repatriation totals eliminated more than 20,000 U.S. jobs.
• Those corporations also reduced their spending on research and development, despite arguments that the tax break would help U.S. companies spend more on developing competitive products.
• While payrolls shrank, these corporations spent more money on repurchasing their stock (to increase the stock price) and on increasing executive pay. Stock repurchases at the top 15 repatriation companies went up by 16 percent the first year after the tax break and 38 percent the second year. Executive pay went up 27 percent the first year after the tax break and 30 percent the next.
• The nine out of 10 U.S. corporations that don’t move jobs overseas and don’t have big stashes of overseas cash got no benefit from the tax break we gave to their competitors. Quite the opposite; they were put at an unfair disadvantage.
• Much of the money these corporations brought back came from offshore tax havens – countries with secrecy laws and a history of facilitating tax dodging.
• In the years since the 2004 repatriation, the corporations went at it again and actually increased the amount of money they keep offshore to avoid paying taxes.
That growing stash of offshore money is the biggest problem with repeating this failed tax policy. Clearly, in the years since 2004, companies have pushed more money offshore in hopes of another tax windfall. If we provide that windfall, we will give even more encouragement to U.S. companies to move jobs, operations, and investments offshore, in hopes of another future tax break. Rather than encouraging investment in America, we would be encouraging U.S. companies to send their money elsewhere, making our economic crisis even worse.
Think about it this way: If someone could invest $100 in Canada, and pay only 5 percent in taxes, or invest in the United States and pay up to 35 percent, wouldn’t they invest in Canada?  The result would give the U.S. economy and companies that don’t move jobs overseas a kick in the teeth.
The nonpartisan Joint Committee on Taxation, which evaluates tax proposals for Congress, has estimated that a new repatriation tax break would cost the treasury $80 billion over ten years, a cost that would have to be paid for through more spending cuts or tax increases.
In addition to costing Uncle Sam a bundle and hurting investment in America, a tax break that rewards multinational corporations for stashing money offshore to avoid U.S. taxes would be a slap to honest taxpayers and to the domestic firms that choose to do business and create jobs right here at home. It would reward the few at the expense of the many, making the U.S. tax code even less fair for average taxpayers.
An army of lobbyists hopes Congress and the American people won’t look at those facts.  They are wagering that, in this time of economic distress, Congress will fall for the same argument as before.  But facts are stubborn things, and I hope the facts can break through the lobbying frenzy for a tax giveaway that helps a few companies but would actually damage our economic recovery.

Carl Levin is the senior U.S. senator from Michigan.

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  • Username75

    An economy is a system to support of All the Citizenry,
    of the Country of which it is located.
    how did Our economy become Enslaved by Wall street?
    We forgot that that simple truth.
    How did We ever think We could compete with the world,
    by Flooding the economies of Other nations, and or be
    Foreign Goods?
    Each Nation should be as “Self Sufficient” as it is practicable.
    We were blessed with Natural resources, which Include real
    People, not just Paper People.
    our economy should serve those Real People,
    as well it does Paper People Addicted in the Buying and Selling
    of Paper, for the sake of Paper alone.
    thus Overinflating the Price of that Paper, until it is found out.
    Then charge the Real People, for the Sins of the Paper People.
    We need to Build our own needs First, Before We buy the Products
    of other Economies.
    That is the Only way an Economy will Survive long, as the Sin of Greed
    is Subtle, and can easily overtake the Nieve.

  • Username75

    You want to Control Wall street?
    Make it a reality if You Buy a Piece of Paper,
    You indeed buy a Piece of Paper, not just for
    Microseconds, but for a Term of 90 days.
    then get rid of all the Side bets like Futures,
    and Derivitives.

  • Username75

    You want to know How brokarage house make Billions each Year.
    They buy a stock the day before it declares a dividend.
    Then the next day when they declare the dividend, they sell You on buying that Stock.
    They Keep the dividend, you get the Shaft.
    Then they have mathematicle Modles of How stocks act
    from Day to Day, If that Stock rises, they buy it for a Microsecond, then sell it when it starts to fall
    seconds away, for what they paid for it Keeping the
    This inflates Your ability to make a return, that they pocket in House.
    That is why most Stocks are so Overinflated.
    Most stocks are just in Name only, and produce nothing
    but New stock Certificates, long after they have Outlived
    the Original purpose they were put on the Stock exchange.
    The commodity Market, is also riddled with fraud to
    Defraud the Consumers, and nobody stops them
    Sam Taylor

  • Username75

    The Final question to American corporations is…..
    If the American Workers must compete, with Workers
    of Nations, with the Lowest standards of Living for jobs.
    Wouldn’t Re-Adaptation of Slavery be the Only Way, to
    Return Jobs to America?.
    Is that Loyalty to America, or Loyalty to Greed.

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