Big Businesses Ask For A Tax Holiday To Bring $1 Trillion Home

A group of multinational corporations is facing off against the Treasury Department over a massive tax holiday that the companies say could spur the economy and boost hiring. The repatriation tax holiday would allow corporations to temporarily skip tax payments when they bring overseas profits back to the U.S.

The federal government currently taxes businesses up to 35 percent on overseas earnings. But Win America, a coalition of multinational corporations including Apple, Google, Microsoft and Pfizer, argues that a temporary tax holiday would allow businesses to invest an estimated $1 trillion in America, creating jobs in the process.

U.S. Treasury officials aren't biting. Instead, they say the temporary corporate tax holiday demanded by a "narrow group of businesses" would cost billions of dollars, according to Michael Mundaca, assistant treasury secretary for tax policy. A tax holiday, he said in a post on the Treasury Department's new blog, would cost an estimated $30 billion and mostly benefit just a few companies. To pay for it, he adds, taxes for other businesses would have to go up.

Mundaca pointed to the results of the last repatriation tax holiday in 2004:

Unfortunately, there is no evidence that it increased U.S. investment or jobs, and it cost taxpayers billions… the nonpartisan Congressional Research Service reports that most of the largest beneficiaries of the holiday actually cut jobs in 2005-06 – despite overall economy-wide job growth in those years – and many used the repatriated funds simply to repurchase stock or pay dividends.

An alternative solution, Mundaca says, is the comprehensive tax reform being discussed by the Obama administration to make the U.S. economy more competitive.

But David Chavern, head of the U.S. Chamber of Commerce, says comprehensive tax reform will only succeed side-by-side with a tax holiday. The most significant argument, he said in a blog post, comes down to where Americans believe companies overseas profits should end up.

Chavern wrote:

Our current tax code provides every incentive for U.S. companies to never, ever repatriate monies earned overseas back to the United States. Why bring it back just to send a large chunk of it to the government? No other major economy taxes foreign earnings in this way. The better choice for any rational company would be to just leave it overseas and invest it there – creating jobs in other countries that should be created here.

Business executives first asked President Obama for the tax holiday in December. But many companies, Bloomberg reported, were already taking advantage of legal loopholes that allowed them to avoid repatriation taxes. Pfizer, for example, brought it more than $30 billion in 2009 while minimizing taxes.

Comments

[jimjames77]

04:22 PM on 03/26/2011

Here's a snippet from Senator Carl Levin.
"According to a January 2009 Congressional Research Service (CRS) analysis, [PDF] of twelve top repatriating companies, ten cut jobs even before the recent economic downturn. Pfizer repatriated $37 billion, more than any other company, yet closed a number of plants beginning in 2005 and cut 9,000 jobs in 2005. Merck repatriated $15.9 billion, but announced layoffs of 7,000 workers in 2005. Hewlett-Packard repatriated $14.5 billion and laid off 14,500 workers. Other top repatriating firms that announced job cuts include Procter and Gamble, PepsiCo, Motorola, Honeywell, Ford, National Semiconductor, and Colgate Palmolive.

[jimjames77]

04:16 PM on 03/26/2011

The repatriation from 2004 was at a rate of 5.25%. Ok lets assume that businesses in this country pay a 35% corporate income tax, what kind of incentive does a tax holiday give. Well these and other loopholes give incentive to move operations overseas. Another aspect to this is that these companies use offshore tax havens. One example is the tax haven of Barbados. Companies who do business in this country, simply set up a PO box that serves as their corporate headquarters or a subsidiary. By using neat little tricks that really smart people come up with they can claim profits were produced offshore. One little trick is using intercompany sales. My US branch will drastically overpay for an item from the offshore branch thereby creating more profit offshore. And now they want to bring those profits back here by paying only 5.25%. Where would you do business?

[pbjack]

03:07 AM on 03/26/2011

If corps. are considered "individuals" (citizens united), I say they should be taxed as such. I know of no one that pays zero in taxes year after year. Maybe I need a better tax dude.

[nobodysgirl]

05:40 PM on 03/25/2011

Just another example - they surface daily now - how the repugs are doing their best to turn the USA into a corporate-state - it already is. They have no problem sleeping at night, taking money from the hides of the poor, children's programs, and anyone else who is not in the top 2%.

Its' hard to recognize America anymore - all we see are the greediest people preying on the most vulnerable.

And they're the 'compassionate christian' party! Yeah, right, repugs - what would Jesus do, indeed.

[Kuncous]

05:31 PM on 03/25/2011

BullShit!!! People stop paying taxes, bump the IRS!

[oilfield]

04:48 PM on 03/25/2011

we should lower all corporate taxes to around 15% .....money would flock to the states....

[MrVee]

10:36 AM on 03/25/2011

I say Hell No!! Jobs first, then we'll talk about a holiday. I'm not interested in any proposal rich people have written to do for THEM first before doing for America. Jobs first, then 10 years out, we can discuss holiday. Where are the jobs republicans claimed they would get for America by keeping the Bush tax cuts in place? WHERE?? Right!
I'm not interested in this new stunt.

[AZreb]

09:32 AM on 03/25/2011

Will Geithner stand up to the mega-corporations? That is the question. So far, so good - but we have to remember that it is campaign season and NO politician wants to bite the hands that feed the campaigns.

That goes for BOTH parties - Ds and Rs.

[pjwrites]

09:03 AM on 03/25/2011

"and many used the repatriated funds simply to repurchase stock or pay dividends."

What would you have them do with that money, pay more to their employees? Hire more people? Offer a pension? Provide health insurance? Ha!

The takers are in charge, son, so unless you want to get a little confrontational and demand a fair share by joining some sort of union of like-minded people, just shut up and be happy to have that poorly paying part-time temporary job, until the ground is sold out from under you.

The Man with the Gold Rules, and the rules say he gets it all, you have no say, and how much is enough gold for a rich man? Remember, the recent poll that revealed the only thing the wealthy fear is not getting wealthier? Gotta have more.

The question is, what to do with these insatiable true "super-consumers" before they take it all? They won't stop themselves. There's no incentive for change.

In nature, should the alpha animal begin eating his own young, he would be challenged to a fight to the death.

We are civilized people, not a pack of animals, but there are no working checks and balances in evidence, self-interest is a given, and the accumulation of money has become leaderships' solitary goal. The rest of us are expected to live off of promises, fed to us by man-eaters.

Sometimes, when prey and pawn become aware, they can turn into predators, too.

[AZreb]

09:36 AM on 03/25/2011

"Evil" is a facet of humans, not animals. Please don't equate packs of animals with what we have in politics - animals kill for food or to defend themselves. "Civilized" behavior goes out the window when greed enters the door.

[NetLoa]

08:17 AM on 03/25/2011

We also need to remove the tax provisions that encourage offshoring. We should instead penalize it.

[Lpeter]

08:13 AM on 03/25/2011

We need a huge investment in clean energy so we can stop spending money on the Military to protect our oil addiction!!

That is what it really comes down too. We spend trillions on the Military machine and the reason we need a military is to secure the black gold. Why else. What the heck are we fighting for. Not democracy. We are losing that here. Hello!!!

[marijam]

07:28 AM on 03/25/2011

Tax codes need to be reformed. Currently, we allow these businesses to deduct debt but tax them on savings and investments. Why force them to borrow money here for expansion plans when they could repatriate and bring the money here. There's a difference between making an investment that will bring future returns and just spending money. Put some stipulations on the repatriated money that it only be used for expansion or research and development. If its going to cost in tax revenues in the short run, figure out some other way to generate revenues. For example, taxing imports.

[Lpeter]

08:09 AM on 03/25/2011

Good post. Reform would start by ending the Fed !! And bring the money thing back in house so we can control our money supply. Not be a slave to it.

these guys are leading the world around by the nose. Enough already. I haven't even had my coffee yet and I'm narly!!!

[Dianne McCarthy]

06:30 AM on 03/25/2011

The multis already have massive profits which should have been enough to boost hiring, but they're sitting on the money. I thought maybe they were gonna wait 'til 2012 election time to trickle down a few coins but maybe they're getting a clue that American workers are at a turning point now. So a little blackmail can't hurt?
Well that can work both ways, if Obama threatens them with a tax hike for offshored money. If they have a trillion bucks sitting around, why aren't the jobs happening now? Oh, I forgot, the Repub Congress would side with multis against American interests.

[marijam]

07:34 AM on 03/25/2011

The answer is that they don't have trillions sitting around. Microsoft recently had to borrow money, money it should not have had to borrow, and pay interest on, when it has overseas profits that it could bring back onshores. American businesses that export have to pay a 35% federal tax, plus state and local taxes (10% maybe), plus whatever VAT the country they want to export products into has, and its usually 18 or 19 %. That makes one of our exports 63% higher in cost, but we let products come into this country without any import taxes. We are going to have to do something to help the USA economy and saying that "we can't afford it now" is just ridiculous since everybody knows that sometimes you have to spend money in order to make money, even the USA government.

[NetLoa]

08:20 AM on 03/25/2011

There are many corporations that pay virtually no federal tax due to loopholes and misdirected "incentives". Certainly very few pay the 35%. I would be happy to reduce the rate by 10% if we eliminate all the loopholes and subsidies (like those enjoyed by the oil and gas industry) and jack up the tax on stock transactions and short term capital gains to penalize speculation.

[Phil Waste]

10:18 PM on 03/24/2011

Do you know how many American Billionaires there are? There are 412. You want to know who they are? Here is the list.

http://en.wikipedia.org/wiki/List_of_countries_by_the_number_of_US_dollar_billionaires

[Phil Waste]

10:36 PM on 03/24/2011

There are about 3,000,000 Millionaires.

Why shouldn't we tax the heck out of them?

[Si1ver1ock]

10:44 PM on 03/24/2011

Because we should tax them commensurate with a sane tax policy.

In other words, the tax they pay should be part of our overall tax system.

Other possible taxes include:
A Wall Street sales tax on transactions over 500K.
A tariff on imports. help balance of trade.

Also, if taxes go too high, they will spend most of their energy trying to avoid taxes.

[Phil Waste]

10:44 PM on 03/24/2011

Raise taxes on the rich to about 85% on anything over one million dollars and this country can start moving forward again. I mean how many people would this affect? Certainly not me and I'll bet most of you. It would only affect a little over three million people in the United States.

How much income do the churches make?

[ZenFUel]

09:32 PM on 03/24/2011

i thought govt spending doesn't create jobs???