Tax “Holiday” for Corporate Profits will Vacate U.S. Jobs
by Karl Stark | June 24, 2011
Given the shaky state of the economy, it’s not surprising to see a broad range of recovery proposals surface from members of Congress. A lackluster May jobs report has increased pressure for substantive and immediate action on the jobs front.
This week, Democrats in the Senate urged that economic stimulus measures be included in the deficit negotiations being led by Vice President Joe Biden. They also announced a forthcoming “Jobs First” agenda that would include time-tested measures to get Americans back to work immediately.
But some in Congress are recycling a Bush-era tax “holiday” initiative (often referred to as repatriation) even though it failed to improve the economy the first time around, and in many cases actually led to further job losses. In 2004, Congress tried to persuade American corporations to invest their overseas profits in job-creation activities here in the United States by temporarily lowering the corporate tax rate from 35 percent to just 5.25 percent for “one time only”.
The result? American multinational corporations brought a whopping $300 billion back to American soil and used it not to create jobs, but to reward their shareholders. One study showed that of every dollar corporations brought back to the U.S., 92 cents went right to shareholders. Over the next six years, corporations that took advantage of the tax “holiday” increased their overseas holdings by 81 percent.
Despite numerous examples to the contrary (see: here, here, here, here and here), some in Congress continue to argue that giveaways to Wall St. will create jobs. That’s why the budget proposal put forth by House Budget Committee Chairman Paul Ryan (R-WI) cuts tax rates for the wealthiest individuals and corporations by an additional 10 percent each. And it’s why Congress agreed last December to continue unemployment insurance for one year ONLY if the Bush tax cuts for highest earners were also renewed.
It would be absurd for Congress to reward companies that move jobs and investments overseas, especially when companies are already hoarding $1.9 trillion as they rake in record profits. Last month, AFSCME joined with the AFL-CIO, the American Federation of Government Employees (AFGE), the Service Employees International Union (SEIU), the United Auto Workers (UAW) and the United Food and Commercial Workers (UFCW) in opposing another tax holiday for offshore corporate profits.
Congress should focus its full attention on getting Americans back to work rather than recycling time-failed initiatives that are no more than hand-outs to CEOs.
