Corporate Tax Holiday Would Shift Investment, Jobs Overseas: Report

In recent weeks, Congressional support has been forming around the idea of another "repatriation tax holiday," reports the Wall Street Journal. The would mean corporations doing business overseas would be permitted to pay only 5.25 percent tax on earnings brought back to the United States for a temporary time period, as opposed to 35 percent corporate tax rate on domestic profits.

Proponents of the proposal claim a tax holiday will bring much needed capital back to the U.S. economy for investment. But not everyone agrees.

Following the conclusion of the last tax holiday, in 2004, corporations actually increased the rate at which they moved investments out of the U.S, according to a study by the Center of Budget and Policy Priorities. The decision to move overseas, the study claims, was at least partly in anticipation of there being another tax holiday.

See how the 2004 tax holiday affected relocation of corporate assets overseas here:

Rather than using their extra earnings to invest in American jobs, corporations laid off thousands of workers and passed the savings onto their shareholders, states the report. Pfizer, which according to the WSJ is one of the main corporate supporters of the newly proposed tax holiday, repatriated $37 billion in 2004, the report states. Despite the repatriation windfall -- the largest of any firm in 2004 -- Pfizer cut 10,000 U.S. jobs in 2005.

The study also takes aim at the claim that a tax holiday would help give firms extra and needed cash to create jobs in the U.S.

"According to the Federal Reserve," the report states, "U.S. non-financial corporations now have $1.9 trillion in liquid assets, the highest level as a share of total corporate assets since 1959." In other words, the report is saying there is enough money to invest as is.

Potential Congressional supporters want the new legislation to require companies would spend the money the way policy-makers intend them to, rather than legislating on faith.

Republican Senators like Orin Hatch (R-UT) wants to make sure companies don't take advantage of the government, reports WSJ. "I'm not against bringing it back this time, but we're going to have to get something back for it." And Senator Charles Schumer (D-NY) who sits on the Senate Finance Committee, stated that he would want to use the new revenue to fund an infrastructure bank, a policy goal of several liberals in Congress, reports Bloomberg.

But how much revenue the government would really take in is up for serious debate.

According to the non-partisan Joint Committee on Taxation, a tax holiday would significantly increase the deficit, reports the WSJ. A tax-holiday would cost the U.S. $78.7 billion in lost revenue over the decade following its implementation, the committee found.

See how a tax-holiday would affect the deficit here:

Comments

[Charles Maas]

05:31 PM on 08/06/2011

If you want jobs to come back to the US, don't give them a tax holiday oversees raise the taxes on Foreign profits and lower the domestic tax. Give them a credit for every new worker they hire and it can't be part time. We may end up paying more for goods manufactured in the US and not cheaply made over seas stuff but at least more people will be getting a pay check. More people working may put a stop to the housing slide and encourage people to start buying homes again and other stuff.

[Elaine Jenkins]

04:39 PM on 07/06/2011

Have you ever wondered why, if according to the Supreme Court, Corporations are people too, how come they are not paying individual tax rates?

[Elaine Jenkins]

04:30 PM on 07/06/2011

We seem to have forgotten that regulations and tariffs exist for a reason.

[amcoffeeguy53]

12:14 PM on 07/05/2011

Non-Financial corporations now have more liquid assests than at any time since 1959 according to this article. That alone speaks voumns about tax breaks and outsourced jobs.

Put an end to the greed that these politicians and corporations have brought to us. No more "holidays" for anyone doing business in the U.S. Further that with a 55% import tax on all products. Unless we curb the trade deficit and end tax breaks for corporations there is no incintive for them to create jobs in the U.S.

Make a law that prohibits any politician from engaging in business with any corporation that has contributed to their election campaign for ten years after they leave office. Make it unlawful for any politician from being a stock holder with any company that contributes to their election campaign. We need to end corrupt government policies. Far to many politicians create laws and entitlements to corporations who pay into their campaigns. Put an end to that and we may see a quick change for the better inn our economic situation.

[New Father]

04:01 PM on 07/05/2011

Heck yea, tax the crapola out of the poor, I'm with you liberals on that one. I'm tired of the poor people buying cheap goods made overseas. Tax everything that poor people buy and than blame Republicans and give the poor more welfare, after all a tariff is just a tax. So you can give them there money back and hopefully buy votes.

[kamact]

09:25 PM on 06/27/2011

Consumers have the power to change this negative pattern,...as our government will not,...buy quality products made in America by Americans,...and do your research to be in the know

[robert horwitz]

07:17 AM on 06/27/2011

OK let's export all our jobs to Europe and import all Europe"s Paid Vacations here. Now that's what I call Fair Trade.

[Ronald Malaney]

01:27 AM on 06/27/2011

the problem is companies can still make more on investments in other countries, and until we make that not so, money will flow out, and if we tax them to fix it, many if not most will leave permanently with their assets, just as logging did, and mining is, and oil production is, and manufacturing is and has.

[higgdj7]

06:30 AM on 06/27/2011

Not sure what the answer would be in a "Free Market System" but I would think a value added tax on anything brought into this country to level the playing field. Any product made in this country has to meet certain standards in production and safety. Big business has left this country to skirt these laws and produce cheaper. This is where the value added tax has to be! Cheap labor, consumer protection, worker safety all has to be added to the cost to import those products to level the playing field. We should lower our bar to "compete" with the world...they should raise their bar to sell here. Its called "Standard of Living."

[flaconoire]

03:34 PM on 06/26/2011

I thought they already had a permanent tax holiday. Gimme more, gimme more!

[Chauncee McFarland]

03:16 PM on 06/26/2011

Lets just stop it already..... and let the Corporations apply for food stamps, Subsidized housing( I mean Subsidized government Skyscrapers) let them claim Earned Income Credit on there Tax return, apply for heating assistance, WIC and medicaid for there employee's.........after all they need help getting back on there feet in this troubled economy too.........if the cash assistants program called t.a.r.p or the 160 billion we gave A.I.G for there government sponsored gamblers anonymous program was not enough...........

[mistykane]

09:50 PM on 06/26/2011

TARP went to banks and lenders that were hurt by the mortgage defaults. Obama also used it to bail out the auto industry. But the banks and lenders paid that back with interest. The companies this article is talking about would be like Coca Cola or McDonald's.

There shouldn't even be a repatriation tax. When our companies make a profit overseas they should be able to bring it back to the U.S. without having to pay a 35% tax on it. This is why they choose to leave their money overseas growing those economies. It's so d.u.m.b. that our politicians try to tax everything that moves and then don't understand it when they get less movement! High taxes can sometimes bring in less revenue, not more.

[hypnotoad72]

01:53 PM on 06/26/2011

Naturally.

What seemed like a tinfoil hat once now makes more and more wonder:  Is infrastructure really moving toward regions where most of the oil resides?  (peak oil, it would be simpler to centralize everything and keep the status quo than anything else...  still, it's probably just corporate greed and nothing truly sinister.)

[moby49]

01:04 PM on 06/26/2011

Yeah right, they will invest the money in the US, only if "US" really means"us", the CEOs and major investors.

Why do we fall for this BS everytime. Either bring it back and have it taxed or leave it over there for the Chinese to tax or take. That's their choice. But for heavens sake no free rides. They are already multi-millionaires and billionaires.

[TexasBlueGal]

08:02 PM on 06/27/2011

So, so true. F&F.

[Cinquopated]

11:55 AM on 06/26/2011

Well of course it encourages corporations to move jobs overseas. Corporations exist ONLY to maximize their own profits. The world would be a completely different place if there was anything other than the profit motive at work in this world. You know what they say - by hook or crook.

[Steve Rockett]

11:48 AM on 06/26/2011

Let's change the field on this and require companies that do business more overseas to leave America, unless they pay a higher tax to stay here. Insist that they get their workers from other countries and put their companies there. No more Board Meetings in the US. I am tired of begging these anti-Americans to stay here. Let them survive in the real jungle. I would rather do business with real American companies, who produce and manufacture here. Let's support our home based businesses. The large corporations are looked up to because they are American, so let's take that away from them. That is worth a lot of money to them.

[hypnotoad72]

02:00 PM on 06/26/2011

Agreed.

We give them tax cuts, tax breaks, other entitlements, and starting with the banks actual bailouts... meanwhile we're still told by some how "tax cuts create jobs"...

No more corporate welfare until they work with US taxpayers ethically.  No more leeching; aren't millions and billions enough, especially as US taxpayers subsidize more and more of it, and that was just one article from 2002... 

[wolfsonnydiane]

04:44 PM on 06/26/2011

You want to change how multi national companys behave tax all products entering usa Then it will warn them they cant just rely on usa citicens never taxing them . nor can they be sure we wont tax incomong goods to the point it makes manufacturing out of the usa a loosing proposition leaving all that capital invested in forien countrys lost .

[Steve Rockett]

11:41 AM on 06/26/2011

There are sharks in these waters, and I am not smart enough to understand the details, but it sure looks like this would be a bad move for small businesses who are based in America.

[hypnotoad72]

02:00 PM on 06/26/2011

Agreed.

Or what's left of them.

[William1950]

11:36 AM on 06/26/2011

get rid of currency altogether.. get rid of the whole idea of profit as a means to get stuff done.. why must we expect that we will be rewarded with artificial wealth for doing what is needed... it's time for the human race to move into the next phase of growth called adulthood...

[hypnotoad72]

02:01 PM on 06/26/2011

The status quo is a fail, as is trickle-down economics.  It just hasn't failed for the few who imposed it to begin with.

Fanned and faved.