Tuesday, October 4, 2011 by CommonDreams.org
Uncle Sam Should Support Built-to-Last Companies, Not Built-to-Loot Enterprises
by Chuck Collins
Uncle Sam Should Support Built-to-Last Companies, Not Built-to-Loot Enterprises
by Chuck Collins
A powerful coalition of U.S.-based global companies is lobbying hard for a "tax holiday" on offshore profits.
Companies like Google, Apple, Pfizer, and General Electric have parked huge amounts of profits — a stash totaling more than $1.4 trillion —in offshore tax havens. They've stowed those funds abroad primarily to avoid having to pay federal taxes on that income.
But now they want to bring their treasure to the United States, albeit at a steep discount on what they owe the IRS. Instead of paying the statutory corporate income tax rate of 35 percent — or even the "effective rate," which for most global companies, is closer to 11 percent — they're urging Congress to let them do this at a tax rate that's a whisker over 5 percent.
They tell Congress they need a "tax holiday" to free up badly needed capital to invest in right here — creating jobs at a time when the U.S. economy is sputtering.
They've formed a lobby front called the WIN America coalition to make their case, spending over $50 million and hiring over 42 lobbyists that previously worked as staffers on select Congressional tax writing committees. Most GOP members would support any tax cut, even in their sleep, so WIN America has focused its lobbying firepower on Democratic members.
The coalition's corporate lobbyists argue this would be a win-win stimulus for the economy and a low-cost way to growth and jobs that both Republicans and Democrats could support.
The problem with these WIN America promises is this: Their pants are on fire. Here's how we know that: They waged the same campaign in 2004 with the same promises that they would create jobs, got their way, and created few jobs. Worse, some companies destroyed tens of thousands of jobs.
According to a new report that I co-authored, America Loses: Corporations That Tax Holidays Slash Jobs, most of the companies that claimed a tax holiday in 2004 dramatically reduced their national and global workforces.
In fact, 58 of the large corporations that took advantage of the 2004 tax holiday shed almost 600,000 workers in subsequent years. This downsizing was not a result of the economic meltdown as many of these companies prospered. Today, these 58 companies maintain combined cash reserves of more than $450 billion. There's nothing holding them back from investing in America.
These 58 giant corporations accounted for nearly 70 percent of the total repatriated funds and collectively saved an estimated $64 billion from what they otherwise would have owed in taxes. The 10 biggest "layoff leaders" were Citigroup, Hewlett-Packard, Bank of America, Pfizer, Merck, Verizon, Ford, Caterpillar, Dow Chemical, and DuPont. Unfortunately, a segment of corporate America embraces a "built to loot" business model.
The corporate flaks will complain that these job loss numbers are exaggerated. We believe they are low, but we won't know for sure until companies that benefit from U.S. tax breaks and subsidies are required to report, in plain language, the number of U.S. employees they have.
Congress shouldn't be fooled again. Limited incentives should go to activities that will create jobs, not another tax holiday for off shore tax dodgers. These companies are not in the business of creating jobs. They are in the business of shifting as much wealth to their top managers and shareholders as possible.
There are other businesses out there — small businesses and domestic companies rooted in local communities that should be the objects of our encouragement and support.
Management guru Jim Collins (no relation) has written about the characteristics of "built to last" companies, businesses that are not "take the money and run" oriented, but are dynamic, growing, and capable of adapting to changing market environments. Built-to-last companies don't play fast and loose with their stakeholders — namely, their employees, shareholders, the communities where they operate, and Mother Earth.
Unfortunately, a segment of corporate America embraces a "built to loot" business model. They shift every possible expense off their balance sheet and squeeze their stakeholders, with the exception of top management and shareholders. They outsource and offshore jobs and engage in accounting gymnastics to game their tax bills to nothing. They mooch from the common treasury, but don't contribute.
Lawmakers should block this fiscally irresponsible and entirely undeserved tax break.
Tuesday, October 4, 2011 by Reuters
Citi, BofA Cut Workers After US Tax Holiday-Report
Report singles out 10 companies for cutting jobs
Companies like Google, Apple, Pfizer, and General Electric have parked huge amounts of profits — a stash totaling more than $1.4 trillion —in offshore tax havens. They've stowed those funds abroad primarily to avoid having to pay federal taxes on that income.
But now they want to bring their treasure to the United States, albeit at a steep discount on what they owe the IRS. Instead of paying the statutory corporate income tax rate of 35 percent — or even the "effective rate," which for most global companies, is closer to 11 percent — they're urging Congress to let them do this at a tax rate that's a whisker over 5 percent.
They tell Congress they need a "tax holiday" to free up badly needed capital to invest in right here — creating jobs at a time when the U.S. economy is sputtering.
They've formed a lobby front called the WIN America coalition to make their case, spending over $50 million and hiring over 42 lobbyists that previously worked as staffers on select Congressional tax writing committees. Most GOP members would support any tax cut, even in their sleep, so WIN America has focused its lobbying firepower on Democratic members.
The coalition's corporate lobbyists argue this would be a win-win stimulus for the economy and a low-cost way to growth and jobs that both Republicans and Democrats could support.
The problem with these WIN America promises is this: Their pants are on fire. Here's how we know that: They waged the same campaign in 2004 with the same promises that they would create jobs, got their way, and created few jobs. Worse, some companies destroyed tens of thousands of jobs.
According to a new report that I co-authored, America Loses: Corporations That Tax Holidays Slash Jobs, most of the companies that claimed a tax holiday in 2004 dramatically reduced their national and global workforces.
In fact, 58 of the large corporations that took advantage of the 2004 tax holiday shed almost 600,000 workers in subsequent years. This downsizing was not a result of the economic meltdown as many of these companies prospered. Today, these 58 companies maintain combined cash reserves of more than $450 billion. There's nothing holding them back from investing in America.
These 58 giant corporations accounted for nearly 70 percent of the total repatriated funds and collectively saved an estimated $64 billion from what they otherwise would have owed in taxes. The 10 biggest "layoff leaders" were Citigroup, Hewlett-Packard, Bank of America, Pfizer, Merck, Verizon, Ford, Caterpillar, Dow Chemical, and DuPont. Unfortunately, a segment of corporate America embraces a "built to loot" business model.
The corporate flaks will complain that these job loss numbers are exaggerated. We believe they are low, but we won't know for sure until companies that benefit from U.S. tax breaks and subsidies are required to report, in plain language, the number of U.S. employees they have.
Congress shouldn't be fooled again. Limited incentives should go to activities that will create jobs, not another tax holiday for off shore tax dodgers. These companies are not in the business of creating jobs. They are in the business of shifting as much wealth to their top managers and shareholders as possible.
There are other businesses out there — small businesses and domestic companies rooted in local communities that should be the objects of our encouragement and support.
Management guru Jim Collins (no relation) has written about the characteristics of "built to last" companies, businesses that are not "take the money and run" oriented, but are dynamic, growing, and capable of adapting to changing market environments. Built-to-last companies don't play fast and loose with their stakeholders — namely, their employees, shareholders, the communities where they operate, and Mother Earth.
Unfortunately, a segment of corporate America embraces a "built to loot" business model. They shift every possible expense off their balance sheet and squeeze their stakeholders, with the exception of top management and shareholders. They outsource and offshore jobs and engage in accounting gymnastics to game their tax bills to nothing. They mooch from the common treasury, but don't contribute.
Lawmakers should block this fiscally irresponsible and entirely undeserved tax break.
++++
Tuesday, October 4, 2011 by Reuters
Citi, BofA Cut Workers After US Tax Holiday-Report
Report singles out 10 companies for cutting jobs
Ten major U.S. corporations, including big banks Citigroup Inc
and Bank of America Corp, laid off workers after enjoying a tax holiday
in 2004-2005 that had been billed as a form of economic stimulus, said a
report released on Tuesday.
With large multinational companies today pressing Congress for another tax holiday, the Institute for Policy Studies reported that the last one did not fulfill its rosy promises for hundreds of thousands of U.S. workers.
Fifty-eight corporations that accounted for 70 percent of overseas profits repatriated under the 2004-2005 tax break collectively saved $64 billion in taxes, then cut 600,000 jobs through layoffs, the report said.
It is the latest in a series of warring studies on whether U.S. multinationals should be allowed, for the second time, to bring home hundreds of billions of dollars in overseas profits at a bargain-basement tax rate.
Large companies are lobbying again for such a tax break, which would let them repatriate much if not all of an estimated $1.5 trillion in overseas profits for well below the full 35-percent corporate income tax rate.
Legislation in the Republican-controlled U.S. House of Representatives would let them repatriate those profits at 5.25 percent, the same tax rate given to them under a similar tax holiday during the Bush administration.
Just as they are doing now, companies six years ago said that the repatriation tax break would boost jobs and the economy. But the institute said this did not happen, as earlier academic studies have also found.
"History shows that many 'tax holiday' companies use repatriated profits to reward executives and other shareholders, then lay off workers. Corporate tax holidays have resulted in precious few U.S. jobs," said Chuck Collins, co-author of the report from the left-leaning institute.
Besides Citi and Bank of America, the report focuses on technology group Hewlett-Packard, drugmakers Pfizer Inc and Merck & Co Inc, and manufacturers Ford Motor Co and Caterpillar Inc.
Telecom giant Verizon Communications Inc and chemical makers Dow Chemical Co, and DuPont are also singled out as corporations that "benefited the most financially from the tax holiday and slashed the most jobs."
The U.S. Senate Permanent Subcommittee on Investigations is looking into the results of the 2004-2005 tax holiday as well. A report from the panel is expected within a few weeks, its chairman, Democrat Carl Levin, told Reuters last month.
In 2004-2005, 843 corporations brought home $362 billion in overseas income at a 5.25-percent tax rate. Analysts said that experience encouraged companies to park more income overseas, allowing them to postpone indefinitely paying any U.S. income tax on it, as long as the money stays abroad.
With the economy struggling and new government stimulus hard to come by, a well-financed corporate lobbying campaign -- organized under the WIN America coalition -- is arguing that another tax holiday would boost the economy.
As reported by Reuters in August, the coalition has hired dozens of former congressional tax-writing committee staffers.
The New Democrat Network, a centrist group, issued a report in August saying an overseas tax repatriation holiday would bring new net revenue into the U.S. Treasury.
At a time of soaring government deficits, the Joint Committee on Taxation, a nonpartisan congressional research arm, has estimated that a tax holiday, like the one proposed in the House and favored by WIN America, would eventually cost taxpayers about $78.7 billion over the next decade.
With large multinational companies today pressing Congress for another tax holiday, the Institute for Policy Studies reported that the last one did not fulfill its rosy promises for hundreds of thousands of U.S. workers.
Fifty-eight corporations that accounted for 70 percent of overseas profits repatriated under the 2004-2005 tax break collectively saved $64 billion in taxes, then cut 600,000 jobs through layoffs, the report said.
It is the latest in a series of warring studies on whether U.S. multinationals should be allowed, for the second time, to bring home hundreds of billions of dollars in overseas profits at a bargain-basement tax rate.
Large companies are lobbying again for such a tax break, which would let them repatriate much if not all of an estimated $1.5 trillion in overseas profits for well below the full 35-percent corporate income tax rate.
Legislation in the Republican-controlled U.S. House of Representatives would let them repatriate those profits at 5.25 percent, the same tax rate given to them under a similar tax holiday during the Bush administration.
Just as they are doing now, companies six years ago said that the repatriation tax break would boost jobs and the economy. But the institute said this did not happen, as earlier academic studies have also found.
"History shows that many 'tax holiday' companies use repatriated profits to reward executives and other shareholders, then lay off workers. Corporate tax holidays have resulted in precious few U.S. jobs," said Chuck Collins, co-author of the report from the left-leaning institute.
Besides Citi and Bank of America, the report focuses on technology group Hewlett-Packard, drugmakers Pfizer Inc and Merck & Co Inc, and manufacturers Ford Motor Co and Caterpillar Inc.
Telecom giant Verizon Communications Inc and chemical makers Dow Chemical Co, and DuPont are also singled out as corporations that "benefited the most financially from the tax holiday and slashed the most jobs."
The U.S. Senate Permanent Subcommittee on Investigations is looking into the results of the 2004-2005 tax holiday as well. A report from the panel is expected within a few weeks, its chairman, Democrat Carl Levin, told Reuters last month.
In 2004-2005, 843 corporations brought home $362 billion in overseas income at a 5.25-percent tax rate. Analysts said that experience encouraged companies to park more income overseas, allowing them to postpone indefinitely paying any U.S. income tax on it, as long as the money stays abroad.
With the economy struggling and new government stimulus hard to come by, a well-financed corporate lobbying campaign -- organized under the WIN America coalition -- is arguing that another tax holiday would boost the economy.
As reported by Reuters in August, the coalition has hired dozens of former congressional tax-writing committee staffers.
The New Democrat Network, a centrist group, issued a report in August saying an overseas tax repatriation holiday would bring new net revenue into the U.S. Treasury.
At a time of soaring government deficits, the Joint Committee on Taxation, a nonpartisan congressional research arm, has estimated that a tax holiday, like the one proposed in the House and favored by WIN America, would eventually cost taxpayers about $78.7 billion over the next decade.
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