Lobbying For Repatriation Tax Break Reaped Huge Reward

Amid a high-powered corporate lobbying campaign to preserve the tax treatment of overseas income, researchers at the University of Kansas have found that when Congress in 2004 granted firms a one-time pass to bring that income home at a reduced tax rate, the lobbying paid off -- big time. Their study found that every dollar companies spent on lobbying for that tax break -- which they tried to revive during the economic stimulus debate this year -- saved them $220 in taxes. The tax change in 2004 temporarily lowered the corporate tax rate from 35 percent to 5.25 percent as an incentive for firms to redeploy their earnings at home to invest in jobs, research and equipment. The results were mixed. Many of the companies resorted to layoffs anyway, and some paid much of their earnings out to shareholders or used them to repay debt, critics said.

The three Kansas professors analyzed the financial reports and lobbying disclosure forms of 476 firms that repatriated about $298 billion. On average, the companies generated a 22,000 percent return from their lobbying efforts, with companies spending the most getting the biggest tax savings. For example, drugmaker Eli Lilly & Co. reported spending $8.52 million in lobbying but saved $2 billion in taxes. Other firms generating large benefits include Pfizer, Merck, Hewlett-Packard, Johnson & Johnson and IBM. The Kansas researchers said the benefits were skewed toward larger, well-established companies, when tax policy should be aimed at providing incentives for startup firms and industries. "Perhaps it is time for a national conversation about the role of lobbyists in tax reform," said Stephen Mazza, associate dean at the KU School of Law, one of the three authors of the study. "We should be concerned when a corporation's most lucrative investment is in lobbying the government for tax benefits."