There's a built-in paradox about the idea of a corporate tax holiday. It's quite literally an opportunity for corporations to take a vacation from paying taxes. But the purported benefit is that it's a chance for the American economy to recover money that corporations sent away to places like Bermuda in order to avoid paying taxes in the first place. Ask a lobbyist working for the coalition of bluechip companies that are gunning for such a loophole, however, and they'd tell you it's a great way to stimulate the economy. Google, Apple, Cisco and Microsoft--and an army of 160 powerful lobbyists--are leading the charge on Capitol Hill for legislation that would provide a $78.7 billion tax break for corporations repatriating offshore funds. The only problem is, when Congress agreed to a similar measure in 2004, it failed miserably. And the general consensus is that it would be no different this time around.
Lobbyists insist that the tax holiday for America's richest companies will work wonders. Bloomberg reports that at least 60 of the 160 total lobbyists advocating for the tax holiday "once worked for a sitting member of the House or Senate." Senate Finance Committee chairman Max Baucus's former chief of staff Jeffrey Forbes is one of the most prominent and this dizzying infographic maps out the rest of the significant connections. Their message is all basically the same. "It would do much to regenerate the economy," former Republican chairman of the House Appropriations Committee and current Oracle lobbyist Robert Livingston told Bloomberg. "A total of $1.5 trillion from all affected U.S. companies would go a long way to pull us out of the doldrums."
The Treasury Department hasn't forgotten about the similar, failed plan in 2004. As Assistant Treasury Secretary for Tax Policy Michael Mundana wrote earlier this year, it's not like corporations don't already have a ton of money inside U.S. borders:
Unfortunately, there is no evidence that it increased U.S. investment or jobs, and it cost taxpayers billions. … In assessing the 2004 tax holiday, 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. Today, when U.S. corporations have ready access to cash they have accumulated and are holding here in the United States, it is even harder to make the case that a repatriation holiday will unlock new investment and job creation.
Lawmakers think it will have the opposite effect. Democratic congressman Lloyd Doggett argues that what makes sense for corporations makes the opposite of sense for workers:
The tax holiday promoted by the WIN America coalition is a real loser for hardworking Americans. It didn't create jobs last time and … multinational corporations have no intention of using this repatriation tax windfall to create jobs. A bargain tax rate on foreign profits, many hidden in tax havens, would be an incentive for job creation abroad and even more layoffs at home.
Academics say tax holidays encourage bad behavior. Edward Kleinbard, a law professor at the University of Southern California, and former tax attorney, told Bloomberg it would send the wrong message:
Why should we reward firms for successfully gaming the tax system when we in turn are called on to make up the missing tax revenues? Much of these earnings overseas are reaped from an enormous shell game: Firms move their taxable income from the U.S. and other major economies -- where their customers and key employees are in reality located -- to tax havens.
Tax experts remind us that there's a long, sad history of trading tax breaks for jobs. Joseph J. Thorndike, the director of the Tax History Project, lists a few failed programs over the past few decades in a column and concludes:
Great idea, in theory. But hiring decisions are not theoretical. In the real world, tax incentives for job creation have a less-than-stellar record. Most have been expensive and inefficient, delivering windfalls to employers without doing much to alleviate unemployment.
This article is from the archive of our partner The Wire.
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