Finally! A bill with bi-partisan support, in both the house and Senate.
Our elected officials have crossed the aisle for “The Freedom to Invest Act of 2011”, HR 1834, to give corporations an 85 percent tax reduction. The Senate calls their bill S. 1671, “Foreign Earnings Reinvestment Act.” This legislation, if enacted, would allow American businesses a one-year tax holiday to bring home about $1.4 trillion in overseas earnings, at an effective tax rate of 5.25 percent, instead of the current 35 percent.
Congress and the Senate are working hard taking lots of money from lobbyists. Data compiled by Bloomberg News show Jeffrey Forbes, once chief of staff for Max Baucus, chairman of the tax-writing Senate Finance Committee, is part of an army of more than 160 lobbyists, including at least 60 who once worked for a sitting member of the House or Senate, pushing for the repatriation holiday. Big results are being promised these days, and with $1.4 Billion reasons, I can see why the job creators are promising so much. With President Obama’s new push for job creation, the Influence Industry/ doublespeak machine WINAmerica has gone into a full court press. So far, $65 million has been spent lobbying for this legislation.
This may seem especially unfair since there isn’t any bi-partisan tax holiday bill sponsored for middle class Americans promising us an 85 percent tax reduction. But keep in mind our elected officials don’t represent the American people. We just don’t pay them enough money. “This is an issue that involves a whole lot of people hired by corporations that are pushing for corporate interests rather than the public interest,” said James A. Thurber, director of the Center for Congressional and Presidential Studies at American University in Washington, in an article by Bloomberg News.
Do corporations flush with cash need a tax holiday? An April analysis from the Center on Budget and Policy Priorities found that 10 of the biggest players in the WINAmerica Coalition are sitting on a combined $47 billion in domestic cash. If the companies aren’t using their excess U.S. cash now to create jobs, they aren’t very likely to spend any money they bring in from overseas on jobs either.
Look at this chart. Firms anticipating a second holiday have already aggressively shifted profit overseas:
According to the Wall Street Journal “Report: Repatriation Tax Holiday a ‘Failed’ Policy” the 2004 effort is a “failed tax policy” that cost the U.S. treasury $3.3 Billion in estimated lost revenues. As seen in the chart above U.S. companies directed more funds offshore, via their perfectly legal off shore tax strategies, Double Irish /Dutch Sandwich. Google really likes this combo.
All the sponsors of this legislation are touting this as a job creation bill: “This bipartisan legislation will bring jobs back home. By encouraging companies to reinvest in America, we can make it in America and create jobs for American workers,” said Rep. Jared Polis (I-CO.), one of the richest members of congress. Rep. Jim Cooper (D-TN) thinks it’s a “No brainer. Over $1 trillion is sitting in foreign banks; money that could be used to create jobs and get our economy back on track.” Rep Kevin Brady (R-TX) says “This is about creating jobs, expanding U.S. businesses and strengthening American companies.” And Rep. Robert Dold (R-IL) “We must act now to bring an estimated $1.2 trillion American dollars home to create jobs and grow our economy.” Just last month Rep. Mike Fitzpatrick (R-PA), another co-sponsor of the bill said: “We need long-term tax reform, but in the mean time we need innovative proposals to create new American jobs in order to reduce the unemployment rate.”
There is no evidence to support any of the false statements by these Congressmen. Jeffrey Immelt, CEO of General Electric, and President Obama’s Job Czar, admitted “corporate tax holidays don’t create jobs, but we should have one anyway”. That’s “Imagination at work” for you (fyi- that’s the tag line for GE). Even the conservative think tank the Heritage Foundation is critical saying there would be “little appreciable increase in domestic investment or job creation.”
The paper trail of securities filings shows how the tax-free money was spent in 2004: it went into the pockets of CEO’s, to stock buy backs and dividends to shareholders. 21,000 jobs were cut, along with research and development. All of this was specifically prohibited in the legislation. Anyone who owned Microsoft stock was very happy to receive a special $3.00/share dividend in 2004. Steve Ballmer was very happy, he received about $1.5 Billion. And he wants more. Steve, along with 15 top executives sent a not-so-subtle message to Congress and the White House: “We can spend the money here in the U.S. or we can spend it over there.” These by the way are the same 15 companies that benefited most from the tax holiday break between 2004 and 2007. “The top five executives at those 15 companies saw their compensation rise 27% from 2004 to 2005 and another 30% between 2005 to 2006.” A 57 percent compensation increase from legislation specifically prohibiting that. I don’t need to go into the litany of laws our Job Creators break. I’ll just start with their lie that they create jobs. Small Businesses are the Job Creators in the United States, not the multinational corporations.
According to the Washington Post, a tax holiday would not produce “a significant change in corporate hiring nor investment plans,” Goldman Sachs reported, because “most firms with large amounts of overseas profits are likely to have adequate access to financing, so the availability of cash on hand is unlikely to be a constraint on investment.” The companies that created off shore tax havens would be the ones who would be lucratively rewarded. With an 85 percent tax cut.
In “Just The Facts: The Costs of a Repatriation Tax Holiday” from the U.S. Department of the Treasury “In 2004, when the U.S. enacted a repatriation tax holiday, the goal was to encourage U.S. multinationals to pay bigger cash dividends from their overseas subsidiaries and use the cash to make investments in the United States. Unfortunately, there is no evidence that it increased U.S. investment or jobs, and it cost taxpayers billions.”
The chart above again shows just how true that is. What’s that saying George W. liked, but couldn’t quite get the words right – “Fool me once, shame on you; Fool me twice, shame on me”.
Write, call, email, or fax your elected officials and say “NO tax holiday” On Bill HR 1863 “Freedom to Invest Act” and Senate bill, S1671, “Foreign Earnings Reinvestment Act.” . Don’t be fooled again.