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Corporate tax holiday for $1.3 trillion, no job creation guarantee

Paula Duffy's picture

Apple, Google and Cisco have joined forces with other corporations seeking a tax holiday on $1.3 trillion earned overseas. Lobbyist job creation is the only one that can be measured.

A second tax holiday on overseas profits is being studied by Congress and some Democrats have voiced the willingness to consider the matter. In 2004, corporations with a large presence outside the U.S. expatriated over $300 billion to the U.S. on which they paid a one-time tax rate of 5.25%. Without the discount, their income would have been taxed at 35%.

Bloomberg News reported today that Google and Apple have joined with Cisco in making a push for one more go-round, this time covering what some estimate to be up to $1.35 trillion in untaxed offshore earnings. If subject to the same tax rate as 2004, the reduction would eliminate $78 billion in U.S. tax revenue.

Proponents believe the return of that kind of money to the country would help stimulate the economy and create jobs. Former Republican Congressman and Speaker designate, Robert Livingston, is now a top lobbyist for Oracle, Corp. “A total of $1.5 trillion from all affected U.S. companies would go a long way to pull us out of the doldrums,” Livingston said.

The Wall Street Journal reported earlier this year, that Senator Carl Levin (D-MI), chairman of the Senate Permanent Subcommittee on Investigations sent a letter to corporations who would be affected by the tax holiday, asking for pertinent information.

The letter informed interested parties that his subcommittee "is currently reviewing matters relating to the repatriation of offshore funds,” and needs“information about your company’s plans if Congress enacted” a proposed tax holiday."

It is at this point that the controversy begins on this issue. Opponents, including the Obama White House point to independent studies that uncovered just how U.S. companies used the $300 billion from the 2004 tax holiday. The bulk of the money went towards the repurchase their own stock and dividends for shareholders.

That is why Sen. Levin's letter specifically asks for the number of workers the companies employed at year's end during the period, 2004-2008, as well as an explanation of how they plan to use what would be returned to the U.S. at a deep tax discount.

Levin was very critical of the idea in 2009 when it was first floated. In his view, it doesn't seem to foster domestic job creation while the huge tax rate discount keeps that money from flowing into the U.S.Treasury to help in deficit reduction. Proponents of the measure claim that the Treasury can't be robbed of what it wouldn't get if corporations kept the money earned in international markets.

But there are jobs being created by the lobbying effort, reports Bloomberg. At present, there are approximately 160 lobbyists working on the Hill on behalf of the tax holiday legislation, with at least 60 who once worked for sitting members of the House and Senate.

The coalition of Apple, Google and Cisco turned over the responsibility for their lobbying efforts to Jeffrey Forbes, who once served as chief of staff to Max Baucus, chairman of the tax-writing Senate Finance Committee. He is only one of three former Baucus staffers lobbying on behalf of the interested multi-nationals.

Although the 2004 bill that established the reduced tax rate attempted to control how the income was used, the Journal reports that the rules were what they called "ineffective and easy to skirt."

Image credit: Wikimedia Commons

Comments

Submitted by Anonymous (not verified) on
A tax holiday on offshore profits would be yet another misguided excuse to allow corporations to pay less taxes on overseas business than taxes on domestic business. Of course companies send jobs overseas as our politicians are fooled into giving tax incentives that are really against domestic job seekers. Besides, giving more money to corporations who are awash in cash already will not add any jobs, simply make the rich even richer. No wonder the "Occupy Wall Street" movement began.

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