Apple, Google, Microsoft Sitting on 58 Billion in Overseas Profits, Blackmailing Us to Avoid Taxes
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America’s largest global corporations are holding $1.5 trillion dollars in profits overseas in order to avoid US taxes. “Apple has $12 billion waiting offshore, Google has $17 billion and Microsoft, $29 billion,” reports the New York Times .
These corporations claim that if we reduce their tax rate on that cash from 35 percent to 5.25 percent (which is less than the rest of us pay in sales taxes), they will bring the money home and invest it in creating badly needed jobs. They claim that for every billion invested, 15,000 to 20,000 jobs will be created directly and indirectly, which means such a tax holiday could create up to 30 million jobs – more than enough to bring us back to full employment and then some!
How does it feel to have the jobs gun pointed at your head? Because that’s what this is – a stickup, a robbery, job blackmail. It’s as if these corporations finally realized that they should emulate Wall Street and pick the carcass clean.
I know, I know. But, aren’t the pro-corporate lobbyists correct when they say that we need those overseas profits here? What good will it do the unemployed if that loot isn’t repatriated? Also, doesn’t that 5.25 percent of $1.5 trillion translate into more than $50 billion in federal revenues that we’ll never see if the money stays parked overseas? And given the fact that Washington is too broke for another jobs stimulus program, don’t we have to play ball with those who have the money to move our economy? Isn’t it time to grow up and realize that we have to encourage, not vilify Corporate America in order to put our people back to work?
Wrong on all counts. Here’s why we shouldn’t give the blackmailers the money.
1. Companies that got the tax breaks last time didn’t create jobs.
After the Bush administration and Congress passed the Homeland Investment Act of 2004, 800 corporations repatriated $312 billion, but didn’t create jobs, according to an in-depth study by the nonpartisan National Bureau of Economic Research ( PDF). “Congressmen argued that it would create more than 500,000 jobs over two years by raising investment in the United States,” the report states.
Here’s what actually happened:
“Rather than being associated with increased expenditures on domestic investment or employment, repatriations were associated with significantly higher levels of shareholder payouts, mainly through share repurchases.... A $1 increase in repatriations was associated with a $0.79 increase in share repurchases and a $0.15 increase in dividends…. [I]t is clear that they were able to reallocate funds internally to bypass the publicly stated goals of the Act.”
In plain English that means that 94 cents of every tax break dollar enriched the shareholders. That leaves six cents on the dollar for investment in research, development and jobs. They scammed us into giving them a tax break to create jobs and then they pocketed the money instead, or as the report summarizes,
“Firms that valued the tax holiday the most and took greatest advantageof it did not increase domestic investment or employment, instead returning virtually all of the cash they repatriated to shareholders.”
2. The money didn’t boost jobs in the overall economy either.
But doesn’t more money for shareholders lead to new investments and jobs all over the economy? They had to do something with the $300 billion.
If you look at the jobs data, you’ll see a steady decline starting in June 2003, when the unemployment rate was 6.3 percent to late 2006 and early 2007 when the rate fell all the way to 4.4 percent (a number we would kill for today). So the unemployment rate started going down before the tax holiday began, and unemployment continued down during the holiday and after it ended. The unemployment rate goes down at a slow, but steady rate showing no sign at all of a bump from the tax holiday.