This process is called a “repatriation tax holiday” and, just as in the Peanuts cartoon, Congress has seen this before.
In 2004, most of the same multinational corporations made the same offer. Even the Bush administration thought it was a bad idea and said it would be unfair to companies who had “already paid their full and fair share of tax” and “would not produce any substantial economic benefits.”
Still, Congress agreed to a “one-time-only” repatriation run at the ball. But instead of using their almost tax-free billions for hiring and investing here, companies like Hewlett-Packard, Pfizer, Ford Motor Company, Merck and Honeywell International gave big windfalls to their corporate owners and shareholders in stock buybacks and dividends while laying off tens of thousands of American workers.
The National Bureau of Economic Research found that the tax holiday did not increase domestic investment, employment or research and development. Instead, they found, a dollar increase in repatriated earnings was associated with an increase of almost a dollar in payouts to shareholders.
It’s not that Congress has amnesia about this failed tax policy, as some have suggested. Charlie Brown remembers Lucy’s trick all too well.
“You must think I’m stupid,” Charlie Brown tells Lucy in the Great Pumpkin episode. But Lucy persists, “This time you can trust me. See, here is a signed document testifying that I promise not to pull it away.”
Tax holiday advocates say this time the legislation will really guarantee that the repatriated profits will be used to invest and create jobs in America.
Charlie Brown, in spite of all of us yelling, “Don’t do it,” gives in. “It’s a signed document,” he says. “I guess if you have a signed document in your possession, you can’t go wrong. This year I am really going to kick that football.”
Lucy pulled the football away with the excuse the document wasn’t notarized.
There’s no foolproof way of writing legislation to stop corporations from behaving the way they did in 2005. And the reality is that the corporations don’t really need the repatriated profits to invest and create jobs here. As conservatively calculated by the Center on Budget and Policy Priorities from company financial statements, the ten corporations doing the heaviest tax holiday lobbying (Adobe Systems, Apple, CA Technologies, Cisco, Duke Energy, Google, Microsoft, Oracle, Pfizer and Qualcomm) have at least $47 billion in cash and other liquid assets readily available for domestic investment and job creation right now.
When Lucy suckers Charlie Brown more than once, she knows that she can do it again and again.
Giving U.S. multinational corporations another “repatriation tax holiday” will encourage them to shift even more of their profits into offshore tax havens until the next time they trick Congress to try and kick the ball. As a result, our country’s deficit will increase when an estimated $79 billion more in corporate taxes is not collected over the next 10 years according to Congress’s Joint Committee on Taxation. That means the rest of us will continue to pay more than our fair share for the essential services of government.
These big corporations benefit immensely from all the advantages of being headquartered in our country. They need to start paying their taxes just as every citizen and small business does.
That’s why Congress should listen to our raised voices: “Don’t do it, Charlie Brown!”
Frank Knapp Jr. is the president and CEO of The South Carolina Small Business Chamber of Commerce.