Will a Corporate Tax Holiday Give Workers Anything to Cheer?
- 7 years ago
Will a Corporate Tax Holiday Give Workers Anything to Cheer?
A few years back, Ms. Forbes explained to my colleague Floyd Norris how the computer manufacturer Dell had lobbied hard for the holiday — claiming
that part of the money would be used to build a plant in Winston-Salem, N. C. “They did bring back $4 billion, and spent $100 million on the plant, which they admitted would have been built anyway,” she said.
A Senate commission reported that the top 15 repatriating corporations reduced their overall United States work force by 20,931 jobs, even as share buybacks increased
and the annual compensation for their top five executives jumped 27 percent from 2004 to 2005 and another 30 percent the next year.
They had lobbied hard for this — dangling before members of Congress the promise
that the repatriated money would add more than 500,000 jobs in the United States over the next two years, as companies paid down debt and engaged in more capital spending, acquisitions, and research and development.
Professor Forbes and her colleagues — indeed, many economists — might swat the question away by arguing
that businesses didn’t use the extra cash to invest and employ because they were well-run businesses, well invested and sufficiently staffed to maximize their profitability.
It was the summer of 2004, and to the glee of multinational corporations across the United States, a bipartisan majority in Congress offered them a gift they had long sought: an opportunity to repatriate billions of dollars stashed overseas
and pay just 5.25 percent in taxes, instead of the statutory corporate rate of 35 percent.
Back then, companies found their way around regulations forbidding this use of the money to simply benefit shareholders and corporate chiefs.
A few years back, Ms. Forbes explained to my colleague Floyd Norris how the computer manufacturer Dell had lobbied hard for the holiday — claiming
that part of the money would be used to build a plant in Winston-Salem, N. C. “They did bring back $4 billion, and spent $100 million on the plant, which they admitted would have been built anyway,” she said.
A Senate commission reported that the top 15 repatriating corporations reduced their overall United States work force by 20,931 jobs, even as share buybacks increased
and the annual compensation for their top five executives jumped 27 percent from 2004 to 2005 and another 30 percent the next year.
They had lobbied hard for this — dangling before members of Congress the promise
that the repatriated money would add more than 500,000 jobs in the United States over the next two years, as companies paid down debt and engaged in more capital spending, acquisitions, and research and development.
Professor Forbes and her colleagues — indeed, many economists — might swat the question away by arguing
that businesses didn’t use the extra cash to invest and employ because they were well-run businesses, well invested and sufficiently staffed to maximize their profitability.
It was the summer of 2004, and to the glee of multinational corporations across the United States, a bipartisan majority in Congress offered them a gift they had long sought: an opportunity to repatriate billions of dollars stashed overseas
and pay just 5.25 percent in taxes, instead of the statutory corporate rate of 35 percent.
Back then, companies found their way around regulations forbidding this use of the money to simply benefit shareholders and corporate chiefs.