by Linda Beale
Repatriation Holiday Lobbying–Money Speaks…
We’ve discussed repatriation before–the tax break being pushed by multinationals who want to bring some of their offshore profits home without paying taxes, as they did in the 2004 “one time only” repatriation break.
The reason they have so much money offshore is that they use gimmicks–such as transfers of intellectual property rights to offshore subsidiaries in low-tax jurisidctions. These are pseudo transfers (to affiliates) of property they would NEVER really sell out of their companies to independent third parties. Having the affiliate “own” the right means that the profits associated with the innovation carried out in the US go to the offshore company and aren’t subject to US tax until they’re officially treated as being transferred back to the parent. “Selling” the IP to the affiliate is done solely to defer/avoid US taxes on those profits. Of course, the transfer pricing for the intellectual property is gimmicky too–since no company would sell its main moneymaker, the idea of a comparable market price is foolish to start with. So most of those profits should have been treated as US profits all along–and subject to tax.
A repatriation holiday would just mean more money in the pockets of the uberrich–the managers and some of the owners. It’s just another corporatist tax giveaway that pushes upward redistribution that moves us even more resolutely towards oligarchy. It won’t create jobs–companies already have plenty of cash to invest in this country if they thought they had customers to make money from.
But the companies probably have a pretty good chance of getting the break, even though it is a stupid waste that adds to the inequality problem and does nothing for creating jobs. Why?
Read after the jump!
First, because some of the wealthiest and most powerful companies want it. And these days, what powerful companies want, Congress tends to be willing to give. Google, Apple, Cisco, Oracal, and many other companies that depend on their outsourced IP are hoping they can avoid even the little bit of tax that they’ve paid in the past.
Second, because those companies have hired as lobbyists people who were very recently staffers to members of Congress who will be writing the law. The most notorious of these is Max Baucus’s former Chief of Staff, Jeffrey Forbes. See Rubin & Drucker, Google Joins Apple in Push for Tax Holiday, Bloomberg.com, Sept. 29, 2011. The piece notes that Forbes is part of an army of more than 160 lobbyists, 60 of which are former congressional staffers, who are pushing for the repatriation holiday. And those aren’t really all the lobbyists–they are just the “registered” lobbyists–i.e., the proverbial ‘tip of the iceberg’. Then there’s the WINAmerica coalition and the firm working with it. This army of lobbyists is out to rape the country, and the same congresspeople who moan and lament about deficits are likely going to give the multinationals an $80 billion (over ten years) tax break just cause their buddies ask them nicely for it.
Even though we have proof that repatriation doesn’t create jobs–the 2004 tax holiday resulted in thousands of jobs LOST as companies fired workers even while repatriation millions–Congress is still contemplating another one. Why? The article notes that one thing that is being touted as an advantage is ‘flooding the US with cash.’ Doubtful. Much of that cash may already be sitting in US banks even though not repatriated through the company. And what is actually brought over and then paid out to managers (in even bigger outsized bonuses) and shareholders (in buybacks or dividends) is perhaps more likely to be invested in Asian markets than it is to stay in the US. Or it will be just more fodder for the rich managers and shareholders to use to buy shares in the secondary markets from their rich peers, that top crowd that owns most of the financial assets. Lot of good that will do the carpentars and drill press operators and other ordinary workers.
One of Boehner’s aides says that former staffers don’t make policy. Balderdash. Those staffers are hired to lobby because they have access and they know their former colleagues. They have access that ordinary Americans don’t have. They are pushing for legislative action on behalf of corporate giants. None of them likely gives a damn that the policies they are pushing for don’t make economic sense at all for ordinary Americans. Why should they care? They are lobbyists in it for their own financial rewards from “selling” an idea to their former colleagues that will benefit their current bosses.
Martin Sullivan has it right, as quoted in the Bloomberg article:
The proposed holiday would reward the companies that have most aggressively parked profits in tax havens such as Bermuda, the Cayman Islands and Switzerland, said Martin A. Sullivan, a former Treasury Department economist and contributing editor for the non-partisan Tax Notes.
“A lot of what companies report as foreign profit is really U.S. profit that should be subject to U.S. tax,” Sullivan said. “Those earnings didn’t get overseas by accident. Many of these companies intentionally put them there to avoid paying U.S. taxes.”
Originally published at ataxingmatter