(Photo from Think Progress)
Thanks to an aggressive lobbying campaign, American multinational corporations that have been sending their US profits overseas are about to be handed a major victory by Congress in what could amount to a massive tax cut that slashes corporate rates to just over 5 percent.
Senators Kay Hagan (D-NC) and John McCain (R-AZ) have introduced legislation with bipartisan support in the Senate that would create a corporate tax holiday, reducing the nominal corporate tax rate from the current 35 percent to as little as 5.25 percent if a company’s payroll expands by even just one employee.
The holiday is meant to convince American corporations, many that now pay no federal income tax at all, to “repatriate” up to $1.5 trillion in profits currently shuttled to low-tax countries overseas and, in theory, use the tax savings to create jobs.
Sen. Hagan — representing the home state of Duke Energy, a major backer of the tax holiday — said the bill is a “tool” to “put people back to work.”
Corporate repatriation legislation proposed by Senators Kay Hagan and John McCain would let U.S. businesses bring home offshore profits at an 8.75 percent tax rate.
The rate on repatriated profits would drop to 5.25 percent if a company’s payroll expanded during 2012, according to a summary of the bill released by Hagan’s office. The current top corporate rate is 35 percent.
To qualify for the lowest tax rate, a company would have to increase its payroll by 10 percent as measured by additional workers or higher employee pay.
“I want to use every tool in the toolbox that’s at our disposal to help our economy and put people back to work,” Hagan, a Democrat from North Carolina, said in an interview on Bloomberg Television today.
One of Hagan’s corporate constituents, Charlotte, North Carolina-based Duke Energy Corp., is a member of the WIN America Coalition, a group of multinational companies lobbying for a tax holiday on as much as $1.4 trillion in offshore profits.
WIN America campaign manager Karen Olick called the Hagan- McCain proposal “a critical step forward in the effort to jump- start our economic recovery.”
Though enthusiastically backed by major businesses and prominent law makers from both political parties, the benefits of a corporate tax holiday on profits moved overseas are minimal to nonexistent at best, a devastating blow to federal revenue at worst.
Estimates from Congress have placed the cost of a corporate tax holiday to the Treasury at just under $80 billion if corporations are allowed to repatriate profits at a rate of 5.25 percent, the figure mandated in the Hagan-McCain bill.
And what amounts to a “75 percent discount” for some of the world’s largest, most profitable companies would likely do little for the struggling economy and 14 million unemployed Americans.
The congressional Joint Committee on Taxation has estimated that a tax holiday would cost the Treasury $78.8 billion in forgone revenue over 10 years if the money was brought back to the U.S. at a tax rate of 5.25 percent.
Tax attorney H. David Rosenbloom said that adding to a company’s gross income, as the Hagan-McCain proposal does, may be friendlier to business than adding to its taxable income because it provides more chances to whittle down a tax liability through the use of deductions and credits.
“Generally, the higher up on a tax form the number appears, the more opportunities there are, the more things that can occur, said Rosenbloom, a partner at Washington-based Caplin & Drysdale Chartered and director of the international tax program at New York University’s law school.
Rosenbloom said lawmakers were embarrassed following the 2004 repatriation when some companies that participated in the tax holiday eliminated jobs.
‘‘This is basically to keep Congress from getting caught red-faced again,’’ said Rosenbloom.
Chuck Marr, director of federal tax policy at the Washington-based Center on Budget and Policy Priorities, which advocates for low-income people, said the Hagan-McCain proposal contains no incentives to create jobs.
‘‘The lower rate strikes me as a fig leaf,’’ Marr said. At 8.75 percent, companies ‘‘are getting a very low rate with no strings. It’s a 75 percent discount.’’
So how did Republicans and Democrats in Congress actually work together and agree on legislation that would do so little to stimulate the economy? It’s all thanks to one of the largest, most aggressive lobbying enterprises in recent congressional history.
Dozens of the nation’s largest corporations, from Apple to Google to United Parcel Service, formed a group called the “WIN America Campaign” with the express purpose of pushing lawmakers to pass a corporate tax holiday. The leadership of the exclusive Washington firm behind WIN America includes Anita Dunn, former communications director for the Obama White House.
Once formed, the group and its corporate backers hired literally hundreds of lobbyists with deep ties to important lawmakers, including several staffers that worked in the office of Senate Finance Committee chairman Max Baucus, a holiday proponent.
As Bloomberg News reports, at least 160 veteran corporate lobbyists with Washington ties and individuals that either served in Congress or worked on Capitol Hill as top staffers have been pushing Congress for the tax holiday.
Lobbyists for corporations like the software giant Oracle insist that slashing tax rates for overseas profits would “go a long way to pull us out of the doldrums” despite the price tag for the government of almost $80 billion. Public policy experts warn that the massive lobbying effort is a case of “a whole lot of people hired by corporations that are pushing for those corporate interests rather than the public interest.”
As a coalition led by Apple Inc. (AAPL), Google Inc. (GOOG), and Cisco Systems Inc. (CSCO) presses for a tax holiday on more than $1 trillion in offshore profits, it is turning to a well-positioned lobbyist: Jeffrey Forbes, once chief of staff to Max Baucus, chairman of the tax-writing Senate Finance Committee.
Data compiled by Bloomberg News show that Forbes 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. Their job is to persuade Congress to establish a tax break estimated to cost the U.S. government $78.7 billion over the next decade.
Independent studies have found that the last time this tax break was tried, in 2004, the bargain rate for bringing home offshore profits did little to spur hiring or domestic investment. Most of the money was used to buy back stock.
“This is an issue that involves a whole lot of people hired by corporations that are pushing for those 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.
The well-organized and powerful campaign for a corporate tax holiday is awash with major names in politics and in Washington. And the effort is truly bipartisan, a stunning display of unity among Democrats and Republicans in order to further the agenda of major American corporations.
Besides former Obama media director Dunn, the team of hundreds lobbying lawmakers on Capitol Hill include former Republican representatives, former staffers for top Democrats and Republicans in the House, several ex-aides to House Speaker John Boehner, and staffers that worked for Finance Committee chair Baucus.
Those with Capitol Hill connections who are lobbying for the repatriation tax break include former Louisiana Representative Jim McCrery, who until 2009 was the top Republican on the U.S. House’s tax-writing Ways and Means Committee; Dena Battle, the former legislative director for that committee’s current chairman, Representative Dave Camp, a Michigan Republican; and at least four former staffers for House Speaker John Boehner.
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In all, three former staffers of Baucus, the Finance Committee’s chairman since 2007, are lobbying on the repatriation holiday. Besides Forbes, there’s Nick Giordano of Washington Council Ernst & Young, a longtime Cisco lobbyist. Microsoft has retained Timothy E. Punke, a former adviser to Baucus on trade issues who is active in Democratic politics.
The WIN America campaign’s manager is Karen Olick, former chief of staff to Senator Barbara Boxer, a California Democrat. One of the spokesmen for the group is Doug Thornell, who most recently was a staffer for Representative Chris Van Hollen, a Maryland Democrat who is a member of the House leadership. Like Anita Dunn, Thornell and Olick aren’t registered lobbyists.
“Our economy needs all the help it can get, and leaving this money in foreign banks when we could bring it home now makes no sense,” Thornell said.
Will a 5.25 percent corporate holiday actually work as intended? History says it won’t.
All of these political luminaries are joining forces with Corporate America to push for a tax cut that, based on the results from the last time it was tried, will do nothing to create jobs or boost the economy. Despite the expertly crafted message from the lobbyists, a tax holiday could actually kill jobs.
Congress last authorized a corporate tax holiday for companies that kept profits overseas in 2004, allowing multinational corporations to repatriate those profits and ultimately save billions of dollars in taxes. Despite this, the result for American workers were actually mass layoffs. 600,000 jobs were lost following the 2004 tax holiday, with companies choosing instead to use the savings to reward executives, boost their dividend for shareholders, or buy back stock.
Fifty-eight corporations that accounted for 70 percent of overseas profits repatriated under the 2004-2005 tax break collectively saved $64 billion in taxes, then cut 600,000 jobs through layoffs, the report said.
It is the latest in a series of warring studies on whether U.S. multinationals should be allowed, for the second time, to bring home hundreds of billions of dollars in overseas profits at a bargain-basement tax rate.
Large companies are lobbying again for such a tax break, which would let them repatriate much if not all of an estimated $1.5 trillion in overseas profits for well below the full 35 percent corporate income-tax rate.
Legislation in the Republican-controlled U.S. House of Representatives would let them repatriate those profits at 5.25 percent, the same tax rate given to them under a similar tax holiday during the Bush administration.
Just as they are doing now, companies six years ago said that the repatriation tax break would boost jobs and the economy. But the institute said this did not happen, as earlier academic studies have also found.
“History shows that many ‘tax holiday’ companies use repatriated profits to reward executives and other shareholders, then lay off workers,” said Chuck Collins, co-author of the report from the left-leaning institute. “Corporate tax holidays have resulted in precious few U.S. jobs.”
Besides Citi and Bank of America, the report focuses on technology group Hewlett-Packard, drugmakers Pfizer and Merck, and manufacturers Ford Motor and Caterpillar.
Telecom giant Verizon Communications and chemical makers Dow Chemical, and EI Du Pont De Nemours are also singled out as corporations that “benefited the most financially from the tax holiday and slashed the most jobs.”
The most important factor to consider in the push for a corporate tax break is that companies in the United States actually enjoy some of the lowest all-around effective tax rates among industrialized nations, and most corporations never pay the advertised corporate rate of 35 percent.
Corporations have absolutely no scruples. They funneled vast sums of money overseas to avoid paying taxes, and now they want a tax exemption to bring it back. If corporations are considered in this country to be people, why should they be treated any differently from the regular Joe?
Hmm. Sure sounds like tax evasion to me. And they should be rewarded?
Any tax cuts for large companies are stupid Large companies just sit on cash and slash to outsource. They just care about the bottom line, no the American economy. Giving them a tax holiday would be retarded.
This is nothing new and I’ve told other people the same thing. U.S. corporations are not job creators; they are wealth hoarders.
It’s a hold over of the deal Bush made with Teapublicans and corporations when legally elected U.S. born President Barack Obama won the 2008 election. Continue hoarding cash until there is a Teapublican in the White House again, keep outsourcing American jobs and we will cut you an even better deal once we take control of the country & turn it into a dominionist theocracy.
Contrary to Teapublican belief & the 5 Teapublicans on the Supreme Court, corporations are not living, breathing human beings.
Tax cheats…that’s what they truly are and of course, dear to the hearts of Republicans. Republicans will line up for this bill. At least I have to give them credit, they are consistent in serving their masters even if they are crooks and tax cheats. Just as long as they are rich and stuff millions into their pockets. Predictable as usual.