A powerful coalition of U.S.-based global companies is lobbying hard for a “tax holiday” on offshore profits.
Companies like Google, Apple, Pfizer, and General Electric have parked huge amounts of profits — a stash totaling more than $1.4 trillion —in offshore tax havens. They’ve stowed those funds abroad primarily to avoid having to pay federal taxes on that income.
But now they want to bring their treasure to the United States, albeit at a steep discount on what they owe the IRS. Instead of paying the statutory corporate income tax rate of 35 percent — or even the “effective rate,” which for most global companies, is closer to 11 percent — they’re urging Congress to let them do this at a tax rate that’s a whisker over 5 percent.
They tell Congress they need a “tax holiday” to free up badly needed capital to invest in right here — creating jobs at a time when the U.S. economy is sputtering.
They’ve formed a lobby front called the WIN America coalition to make their case, spending over $50 million and hiring over 42 lobbyists that previously worked as staffers on select Congressional tax writing committees. Most GOP members would support any tax cut, even in their sleep, so WIN America has focused its lobbying firepower on Democratic members.
The coalition’s corporate lobbyists argue this would be a win-win stimulus for the economy and a low-cost way to growth and jobs that both Republicans and Democrats could support.
The problem with these WIN America promises is this: Their pants are on fire. Here’s how we know that: They waged the same campaign in 2004 with the same promises that they would create jobs, got their way, and created few jobs. Worse, some companies destroyed tens of thousands of jobs.
According to a new report that I co-authored, America Loses: Corporations That Tax Holidays Slash Jobs, most of the companies that claimed a tax holiday in 2004 dramatically reduced their national and global workforces.
In fact, 58 of the large corporations that took advantage of the 2004 tax holiday shed almost 600,000 workers in subsequent years. This downsizing was not a result of the economic meltdown as many of these companies prospered. Today, these 58 companies maintain combined cash reserves of more than $450 billion. There’s nothing holding them back from investing in America.
These 58 giant corporations accounted for nearly 70 percent of the total repatriated funds and collectively saved an estimated $64 billion from what they otherwise would have owed in taxes. The 10 biggest “layoff leaders” were Citigroup, Hewlett-Packard, Bank of America, Pfizer, Merck, Verizon, Ford, Caterpillar, Dow Chemical, and DuPont.
The corporate flaks will complain that these job loss numbers are exaggerated. We believe they are low, but we won’t know for sure until companies that benefit from U.S. tax breaks and subsidies are required to report, in plain language, the number of U.S. employees they have.
Congress shouldn’t be fooled again. Limited incentives should go to activities that will create jobs, not another tax holiday for off shore tax dodgers. These companies are not in the business of creating jobs. They are in the business of shifting as much wealth to their top managers and shareholders as possible.
There are other businesses out there — small businesses and domestic companies rooted in local communities that should be the objects of our encouragement and support.
Management guru Jim Collins (no relation) has written about the characteristics of “built to last” companies, businesses that are not “take the money and run” oriented, but are dynamic, growing, and capable of adapting to changing market environments. Built-to-last companies don’t play fast and loose with their stakeholders — namely, their employees, shareholders, the communities where they operate, and Mother Earth.
Unfortunately, a segment of corporate America embraces a “built to loot” business model. They shift every possible expense off their balance sheet and squeeze their stakeholders, with the exception of top management and shareholders. They outsource and offshore jobs and engage in accounting gymnastics to game their tax bills to nothing. They mooch from the common treasury, but don’t contribute.
Lawmakers should block this fiscally irresponsible and entirely undeserved tax break.
Chuck Collins is a co-author of the new Institute for Policy Studies report, America Loses: Corporations that Take Tax Holidays Slash Jobs. www.ips-dc.org