Five Job-Destroying CEOs Trying to “Fix” the Debt by Slashing Corporate Taxes and Cutting Social Security Benefits
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3. David Cote, Honeywell
U.S. jobs destroyed since 2007: 4,000
Average effective federal corporate income tax rate, 2009-2011: -14.8%
Honeywell has created 10,000 new jobs since 2007 – outside the United States. At home, the firm has eliminated 4,000 jobs. In July, Honeywell announced it was closing a Metropolis, Illinois plant, laying off 230 workers, and selling another Illinois property, Sensata Technologies, to Bain Capital, Mitt Romney’s old private equity firm. Bain, another Fix the Debt supporter, immediately announced it was closing the 175-worker plant and shipping the jobs to China.
Are Honeywell’s U.S. job losses the result of Uncle Sam strangling all the life out of the company? Hardly. Over the last three years, the firm has been highly profitable each year, with total U.S. profits of $2.5 billion. And yet Honeywell used deductions, credits, and loopholes to garner refunds totaling $377 million over the last three years – an effective tax rate of negative 14.8 percent. If Honeywell had paid the full 35 percent corporate tax since 2009, the U.S. deficit would have been reduced by $1.3 billion.
Honeywell is not only near the front of the IRS refund line, it is also among the top recipients of government contracts. In 2011, the firm got $725 million in government deals, making it the 35th-largest federal contractor. Tax refunds go in one pocket, while taxpayer-financed government contracts go in the other.
Still, Honeywell’s nearly tax-free status hasn’t kept CEO Cote from being one of the most outspoken advocates for more corporate tax cuts. One of his favorite proposals is a shift to a territorial tax system, which would permanently exempt all foreign earnings of U.S. corporations from U.S. income taxes. Cote was one of 12 big company CEOs who met with President Obama on November 14 to plead for this tax break. Honeywell has more than $8 billion stashed offshore and could receive an immediate tax windfall of more than $2 billion if Congress approved this shift to a “territorial” tax system. According to an Institute for Policy Studies report, Fix the Debt corporations as a whole would stand to gain $134 billion.
Perhaps even more galling is Cote’s demand for cuts to earned benefit programs. Cote has $78 million in his Honeywell retirement accounts, enough to qualify for monthly retirement checks of $428,000 starting at age 65. In contrast the average retiree receives just $1,237 a month from Social Security.
4. Kenneth Frazier, Merck
U.S. jobs destroyed since 2007: 13,000
Average effective federal corporate income tax rate, 2009-2011: 13.2%
In 2009, Merck merged with Schering Plough to become the world’s second-largest pharmaceutical company. Less than a year later, Merck slashed 15 percent of its workforce, including closing facilities in Miami Lakes, Florida and Cambridge, Massachusetts. All told, between 2007 and 2011, Merck destroyed nearly 25,000 jobs, including at least 13,000 in the United States.
Merck’s radical downsizing has little to do with burdensome taxes. Between 2009 and 2011, the drug giant paid just 13.2 percent of its $9 billion of U.S. income in federal corporate income taxes. If Merck had paid the full 35 percent rate over the three-year period, the U.S. debt would have been reduced by nearly $2 billion, enough to pay for college scholarships for more than 250,000 students. But that’s not a low enough tax rate for Merck. As a part of Fix the Debt, CEO Kenneth Frazier is telling Congress the prescription to restore the U.S. economy should include a permanent corporate tax holiday for offshore earnings. If Congress fills that prescription, Merck could receive a $15 billion windfall on the $44 billion it has stashed offshore.