The (cough) ‘Grand Bargain’ – ‘Tax Holiday for Overseas Corporate Profits Would Increase Deficits, Fail to Boost the Economy, and Ultimately Shift More Investment and Jobs Overseas’
We are a ‘demand side economy’. When people have
money (jobs), they ‘demand’ (buy) and that creates jobs.
A ‘supply side economy’ cuts taxes for the
corporations – thinking that with the extra income,
they will create jobs to make products the people
don’t have the money (jobs) to pay for.
Why reward the corporations for using the tax laws?
This from 2011 when Congress was talking about it.
‘Nevertheless, the evidence shows that the first
holiday failed to produce the promised results. Its
primary effect was to provide a huge windfall to
the shareholders of a small number of very large
‘Moreover, a new tax holiday would increase budget
deficits by tens of billions of dollars over the
coming decade. And unlike the 2004 repatriation
holiday, which was sold as a “one-time-only” event,
a second holiday would send a powerful message to
corporations to shift investment and jobs overseas
and hold the profits there — until yet another tax
holiday is declared’.
‘Corporations Say Special Tax Holiday Will Create
Jobs. Don’t Believe Them’
‘Here’s how the nonsense would work, in theory.
Companies doing business oversees pay foreign taxes
(the same way a Mexican company working out of
Kansas pays U.S. taxes). When they bring home
profits, they pay the difference between the
foreign and U.S. tax rates. That is a disincentive
to invest domestically and create jobs. If
Washington announces a brief “holiday” for
repatriated income, every wins. A trillion bucks
comes home, Washington gets a cut to pay off the
deficit, and domestic investment comes roaring into
‘That’s the theory. Here’s the reality’.
‘In 2005, the Bush administration announced a
holiday for repatriated income. Three hundred
billion dollars came back to the United States, but
“92 percent went straight to shareholders in the
form of dividends and stock buybacks,” David
Kocieniewski writes in the New York Times’.
‘A study by the National Bureau of Economic
Research found the program “did not increase
domestic investment, employment or research and
‘Heritage: Repatriation Tax Holiday Wouldn’t Create
‘In a break from many Republican lawmakers and a
host of major U.S. companies including Google Inc.,
Apple Inc., Pfizer Inc. and Microsoft Corp., the
Heritage Foundation said in a new study that a
repatriation tax holiday would not motivate
companies to hire new workers’.
‘While the tax break would likely prompt companies
to bring home overseas profits, those companies
wouldn’t use the extra cash to hire workers, launch
mergers or make other new investments they wouldn’t
already undertake, argue senior fellow J.D. Foster
and senior policy analyst Curtis Dubay’.
‘The 2004 tax holiday prompted 843 corporations to
bring back $312 billion to the U.S., according to
the Internal Revenue Service. But the repatriated
funds were primarily used to reward shareholders,
largely through dividends and stock buybacks,
according to a 2009 study published by the
nonpartisan National Bureau Of Economic Research’.