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GannonFan wrote:Need more details, but I wouldn't be against it per se - there's plenty to be said to simplifying things and this is a step in that direction.

death dealer wrote:Seems a little wishful thinking/doomed to fail/too good to be true to me. I mean as it reads to me a key part of this lies with the corporations doing the right thing and not what's best for the bottom line. That never happens. But I've been drinking since about 4:00 pm, so what the hell do I know.

By KRISTINA PETERSON


The report warned against repeating the tax break, calling the 2004 effort "a failed tax policy" that cost the U.S. Treasury $3.3 billion in estimated lost revenues over 10 years and led to U.S. companies directing more funds offshore. U.S.-based multinationals often defer bringing back profits earned abroad to avoid paying U.S. taxes on them.

The 15 companies that repatriated the most after the 2004 tax break on the return of overseas profits later cut a net 20,931 jobs between 2004 and 2007 and slightly decreased the pace of their spending on research and development, found the report surveying 19 companies' activity.

When Congress passed the repatriation tax holiday in 2004, the legislation specified that the funds should be earmarked for activities like hiring workers or conducting research and prohibited using the money for executive compensation or buying back stock. Companies that brought back profits earned abroad saw them taxed at roughly 5%, instead of the top 35% corporate tax rate.

"There is no evidence that the previous repatriation tax giveaway put Americans to work, and substantial evidence that it instead grew executive paychecks, propped up stock prices, and drew more money and jobs offshore," Sen. Carl Levin (D., Mich.), chairman of the subcommittee, said in a statement Monday night. "Those who want a new corporate tax break claim it will help rebuild our economy, but the facts are lined up against them."

The survey comes less than a week after Sens. John McCain (R., Ariz.) and Kay Hagan (D., N.C.) introduced a proposal for another repatriation tax holiday that would lower the tax rate on repatriated funds to 8.75%, with the opportunity to see that decrease to 5.25% if a company expanded its payroll. In the House, Rep. Kevin Brady (R., Texas) introduced a similar bill in May.

However, repeating the 2004 repatriation tax break has already come under criticism from skeptics, including the conservative think tank the Heritage Foundation, who have argued that companies aren't low on capital and the tax break won't nudge them into making any investments they wouldn't already make.

The five companies that benefitted the most from the 2004 tax break included Pfizer Inc., Merck & Co., Hewlett-Packard Co., Johnson & Johnson and International Business Machines Corp., repatriating $88 billion, or 28% of the total amount brought back to the U.S., according to the report. In total, 843 companies brought back $312 billion, the Internal Revenue Service has assessed.

The report noted that Pfizer had the single largest share of the repatriated profits, bringing home $35.5 billion in foreign earnings, while also cutting 11,748 U.S. jobs between 2004 and 2007. Similarly, IBM brought back $9.5 billion, but cut 12,830 jobs, the report stated, citing answers from the companies in response to its questions.

Meanwhile, the top 15 repatriating companies also accelerated their spending on stock buybacks and executive compensation after the tax break. The top five executives at those 15 companies saw their compensation rise 27% from 2004 to 2005 and then another 30% between 2005 to 2006.

The tax break gave a boost to a narrow slice of U.S. multinationals, with pharmaceutical and technology companies reaping more of the benefits and provided "no benefit to domestic firms that chose not to engage in offshore operations or investments," the report found.

Companies brought back funds held in areas that the Government Accountability Office has labeled tax havens, including Switzerland, the Bahamas, Bermuda, the Cayman Islands and Ireland. Of the 19 companies surveyed by the committee, seven repatriated between 90% and 100% of their funds from tax havens.

The 2004 repatriation tax holiday further motivated companies to keep even more of their earnings overseas, the report found. With the exception of Pfizer, the 10 companies that repatriated the most money after the 2004 tax break have stashed increasing funds offshore every year since the 2004 tax break, the survey noted.

For example, Coca-Cola Co. brought back "nearly all" of its qualified earnings from a unit in the Cayman Islands that had no Cayman employees and functioned to provide "legal insulation" for its U.S. assets, the company answered in the survey.

The "negative effects" of the tax break "create unfair tax advantages for a narrow sector of corporations with damaging economic impacts on the U.S. economy as a whole," the report concluded.

kalm wrote:Here's an interesting read from the WSJ about a report released concerning the impact of the 2004 repatriation holiday. Doesn't look like it helped the overall cause much but worked out great for a select few in Big Pharma and the financial sector who just so happen to be Dave Camp's biggest donors. Go figure.

I also like the Heritage Foundation's take on it. Now if they would only recognize that the same rule applies for all tax cuts when it comes to job creation.

danefan wrote:

death dealer wrote:Seems a little wishful thinking/doomed to fail/too good to be true to me. I mean as it reads to me a key part of this lies with the corporations doing the right thing and not what's best for the bottom line. That never happens. But I've been drinking since about 4:00 pm, so what the hell do I know.

I'm not sure I follow the point about doing the right thing versus the bottom line?

GannonFan wrote:

kalm wrote:Here's an interesting read from the WSJ about a report released concerning the impact of the 2004 repatriation holiday. Doesn't look like it helped the overall cause much but worked out great for a select few in Big Pharma and the financial sector who just so happen to be Dave Camp's biggest donors. Go figure.

I also like the Heritage Foundation's take on it. Now if they would only recognize that the same rule applies for all tax cuts when it comes to job creation.

I don't know, I think they're being pretty consistent when you think about it - their whole point is that temporary tax measures almost never work the way that those who design the temporary tax measure think they will work. This idea that repatriation holiday will result in changes to long term behavior is just silly. When you know the timeframe is short and when you know that long term it won't be there and, even more so, that behavior you would do during the repatriation will negatively affect you long term outside of the repatriation, then it's pretty predictable that repatriation holidays, absent any long term changes to the tax code, will only yield short term results. I imagine groups like the Heritage Foundation would always be against measures like this, just like they were probably against Bush's one time $500 tax rebate to everyone and the way they're probably against Obama's short term payroll tax holiday. And they would seem to have a pretty good point about these short term measures that don't change the long term picture.

Heritage Foundation, who have argued that companies aren't low on capital and the tax break won't nudge them into making any investments they wouldn't already make.

kalm wrote:

GannonFan wrote:
I don't know, I think they're being pretty consistent when you think about it - their whole point is that temporary tax measures almost never work the way that those who design the temporary tax measure think they will work. This idea that repatriation holiday will result in changes to long term behavior is just silly. When you know the timeframe is short and when you know that long term it won't be there and, even more so, that behavior you would do during the repatriation will negatively affect you long term outside of the repatriation, then it's pretty predictable that repatriation holidays, absent any long term changes to the tax code, will only yield short term results. I imagine groups like the Heritage Foundation would always be against measures like this, just like they were probably against Bush's one time $500 tax rebate to everyone and the way they're probably against Obama's short term payroll tax holiday. And they would seem to have a pretty good point about these short term measures that don't change the long term picture.

Heritage Foundation, who have argued that companies aren't low on capital and the tax break won't nudge them into making any investments they wouldn't already make.

My point, and I could be wrong, is that I doubt that Heritage would make the same assesement to tax rates in general. For example, small business owners won't hire more people because they are paying less in taxes. They will hire more people when demand for their product increases. It's the "tax cuts lead to more jobs" meme that I was attacking. If Heritage doesn't buy in to that, my bad. I sometimes get my utopic libertarian beleiving think tanks confused.

death dealer wrote:

danefan wrote:
I'm not sure I follow the point about doing the right thing versus the bottom line?

I don't know either. I was shitfaced when I read this thread and posted my response. Oh well.

GannonFan wrote:

kalm wrote:



My point, and I could be wrong, is that I doubt that Heritage would make the same assesement to tax rates in general. For example, small business owners won't hire more people because they are paying less in taxes. They will hire more people when demand for their product increases. It's the "tax cuts lead to more jobs" meme that I was attacking. If Heritage doesn't buy in to that, my bad. I sometimes get my utopic libertarian beleiving think tanks confused.

I'm not sure, you may have to ask Heritage what they think. But I doubt that anyone believes the premise you're putting forward, that tax cuts lead directly to more jobs. The middle part, that is, that they can sell more of whatever they sell (be it from increased demand either from being able to produce it cheaper or being from the market increasing its own buying power or being from whatever it is you make being in more demand ala Apple's iPhones, etc) is kind of an important step in the process. But tax cuts help at least either, or both, of the first two ways to sell more, so I'm not sure what you are attacking. But then again, I sometimes get my utopic, partisan-heavy posters confused.

kalm wrote:

GannonFan wrote:
I'm not sure, you may have to ask Heritage what they think. But I doubt that anyone believes the premise you're putting forward, that tax cuts lead directly to more jobs. The middle part, that is, that they can sell more of whatever they sell (be it from increased demand either from being able to produce it cheaper or being from the market increasing its own buying power or being from whatever it is you make being in more demand ala Apple's iPhones, etc) is kind of an important step in the process. But tax cuts help at least either, or both, of the first two ways to sell more, so I'm not sure what you are attacking. But then again, I sometimes get my utopic, partisan-heavy posters confused.

It's pretty much been a central theme of our tax policy on both sides of the aisle for 30 years. It is also a core belief of most Republicans. So yes, you are confused.

GannonFan wrote:

kalm wrote:
It's pretty much been a central theme of our tax policy on both sides of the aisle for 30 years. It is also a core belief of most Republicans. So yes, you are confused.

See, they tried to simplify it for you, leave out a step, and now you're confused. They made it too easy for you to understand - imagine that.