Time for another corporate tax break?
Devil’s bargain or good idea?
The New York Times reports that some of the nation’s largest corporations have amassed vast profits outside the country and are pressing Congress and the Obama administration for a tax break to bring the money home.
Apple has $12 billion waiting offshore, Google has $17 billion and Microsoft, $29 billion, the Times writes.
Under the proposal, known as a repatriation holiday, the federal income tax owed on such profits returned to the United States would fall to 5.25 percent for one year, from 35 percent, the Times reports.
In the short term, the Times writes, the measure could generate tens of billions in tax revenues as companies transfer money that would otherwise remain abroad — and it could help ease the huge budget deficit.
Corporations and their lobbyists say the tax break could boost the weak recovery by inducing multinational corporations to inject $1 trillion or more into the economy, the Times reports. They promoted the proposal as “the next stimulus” at a conference last week in Washington.
“For every billion dollars that we invest, that creates 15,000 to 20,000 jobs either directly or indirectly,” Jim Rogers, the chief of Duke Energy, said at the conference. Duke has $1.3 billion in profits overseas, the Times reports.
But that’s not how it worked last time, the Times writes. Congress and the Bush administration offered companies a similar tax incentive in 2005. Although the tax break lured 800 companies into bringing $312 billion back to the United States, 92 percent of that money was returned to shareholders in the form of dividends and stock buybacks, the Times reported, city a study by the nonpartisan National Bureau of Economic Research.
What do you think?
Is this the time to cut corporate taxes to induce more job creation? Or is the measure likely to benefit those who don’t need help while bypassing those who do?
- Henry Unger, The Biz Beat
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83 comments Add your comment
thies
June 20th, 2011
11:37 am
no tax breaks for company. penalize companies with harshly increased taxes for shuffling jobs and revenue overseas. everything else has failed.
Jenny Sutton
June 20th, 2011
11:40 am
Why should we believe that the multinationals would “inject” their net profits into the economy, not just sit on their cash the way other U.S. companies and banks are already doing?
Abbysenia
June 20th, 2011
11:42 am
I think they should pay their taxes… But at this point we are in a desperate situation. Anything is worth a try at this point. Give them the break with SPECIFIC guidelines and qualifications… No more tax breaks with out bounderies as before…or we’ll just see it shift over to low cost wages in China and India.
Mike
June 20th, 2011
11:45 am
Hey tar and feathers party, why don’t you move to one of these countries where you’re putting your money? You obviously don’t care about the United States, and the American people don’t want unpatriotic jerks like you living in the U.S. You can take Neil Boortz and Rush Limbaugh and all the other America-hating jerks with you.
George P. Burdell
June 20th, 2011
11:47 am
Don’t forget that many people, not just the rich, own stock in these companies through retirement accounts, pensions etc and regular investments. That would benefit all and would find its way back into the economy. When people see their investments doing better, they are more likely to spend. That leads to more jobs.
The money is sitting overseas because it is too costly to bring it back. These profits are all going to be taxed at 35% so this idea that companies would be able to use deductions to greatly reduce the tax bill is flat out wrong. If they were going to be able to use deductions, much of that money would already be over here. Some of it may not come back even if taxes were eliminated because companies may have better investment opportunities where it is. We do not have the power to make them bring it back to the US and if we tried, more companies would simply move operations overseas permanently. We have become a bunch of spoiled brats with a terribly inefficient tax code. Instead of trying to fix the problems and make ourselves more competitive, we sit around and fight over who is getting away with more and who should be made to pay. Even if we taxed all of it at 100% and it all came back to the US, 1 trillion is not going to fix the problems we are currently facing.
Over this...
June 20th, 2011
11:54 am
It disgusts me how these corporations are holding these funds hostage. The rest of us are demanded by our government to be good citizens… yet these corporations who shower our elected officials in gifts and cash are allowed a free ride. This country was built on revolution… maybe it is time for another one. Not an armed one, but one waged at the ballot box.
ATF
June 20th, 2011
12:04 pm
We gave them tax breaks already – that were supposed to create jobs and stimulate the economy. Instead, they invested overseas. Now they want a tax break to bring home the profits they made from the earlier tax break.
It never ends.
lovelyliz
June 20th, 2011
12:17 pm
If the $ is returned, untaxed to shareholders, and shareholders invest it overseas, it does nothing to help our economy. Again, give tax breaks only on $ that is invested/used for job creation in the USA.
RGB
June 20th, 2011
12:35 pm
All you anti-business and anti-capitalist types should just double-down on Obama for another 4 years.
Here’s what to expect: When you’re able to find work you’ll be paid less. Chances are your employer will drop healthcare coverage because of ObamaCare since employers who cover 80-110 million workers have said that’s what they’ll do. Your taxes will be substantially higher because there are not enough of “those rich people” to pay all the taxes. You’ll be living in smaller houses and drive smaller cars while paying more for gasoline because Obama’s energy policy is to not look for it. Say goodbye to your nest egg since your home value, which has already fallen $100k on average, will decline further. Your savings will be worth half in buying power because the Fed will print money and loan it to the government making yours worth way less. In addition, you may not be able to retire–ever.
And then you can scratch your head and say “I don’t understand it because I voted for Obama. Twice. We need to raise taxes on the evil rich and corporations–again, and again and again until we choke the life out of them so they’ll create jobs.”
shaggy
June 20th, 2011
12:52 pm
1) Corporations don’t pay taxes. YOU do, when you buy products that have factored taxes paid into the price of the product. Do you want to pay more? If your answer is “yes” go ahead and raise the corporate taxes.
2) If you want to get the economy going, make the business environment better in this country, so the corps don’t go offshore to make profit. Forget about tariffs, the money these US corps have made, is made totally in the foreign market. Again, do you want to pay more? If the answer is “yes” go ahead and somehow add tariffs, and YOU will pay more.
3)Pass the Fair Tax or some other consumption tax, so the ones spending are paying, and the ones saving are…saving.
lisa
June 20th, 2011
1:26 pm
Unless every citizen in America is going to be given a reprieve on their taxes to the tune of 5.25% – to HECK with the BIG CORPORATIONS! It is already proven that they have so many write-offs it’s pathetic. The citizens should be as lucky!!!!!
As a matter of fact, OUR COUNTRY SHOULD BE PENALIZING THEM FOR MOVING JOBS OVERSEAS AND ISSUE A CORPORATE “TAX” ON THEM EACH AND EVERY YEAR THEY DO SO – SLAP A 10-15% ADDITIONAL TAX ON THOSE THAT DO AND SEE HOW SWIFTLY JOBS STAY IN AMERICA…..
Really?
June 20th, 2011
1:28 pm
Bill Gates advocates that the “wealthiest” like him pay more individual income tax but seeks tax breaks on $29 billion of Microsoft’s offshore money? ( http://www.youtube.com/watch?v=iVOwaMWewGY ) Even if the income tax was raised to 99% on the wealthiest, Bill Gates would likely never pay a dime, but now that actual money is at stake he changes his tune.
Hank Dude
June 20th, 2011
1:36 pm
@RGB:
“All you anti-business and anti-capitalist types should just double-down on Obama for another 4 years.
Here’s what to expect: When you’re able to find work you’ll be paid less. ”
How is that different than what we had under Reagan, HW and GW Bush? The only time in the last 30 years that real wages grew was under Clinton.
Tax cuts does not = more jobs or higher wages. Trickle down economics is a failed proposition and we all know it. Some of our folks may be delutional or full of the cool aid, but the botom line is, tax breaks is not what make corporations invest, it is the demand for their products that make them invest in any economy.
You cannot stimulate demand by giving the money to people who don’t need anything. That is just common sense.
Many of you get tax breaks by buying your homes, how come you are not out there buying a second home because you recieve a tax break from owning your own home?
An economy without stimulated demand is like our current housing market, nobody in his / her right mind will invest in it even when you give them tax breaks. Bottom line, give the money / breaks to those who actually need to spend, so they can spur demand and watch these companies break their collective necks to be the first to invest.
markie mark
June 20th, 2011
1:48 pm
“92 percent of that money was returned to shareholders in the form of dividends and stock buybacks, the Times reported,”
Just out of curiosity, do you think the shareholders ate the money? Whether they saved it or spent it, it was in the US Economy, not overseas (and if they saved it, then it was lent by the savings institutions to other borrowers, still making it in the viable US economy). This is a no brainer, boys and girls….
Denise
June 20th, 2011
1:51 pm
You know…just once I would LOVE to read through a blog without all the name calling. I pray that most of you aren’t parents. It’s time to stop seeing things in black and white, Democrat or Republican and start seeing things for how they really are. At the end of the day, the bottom line for every corporation is MONEY..just like when you go to work and expect to be paid for your efforts. I am praying for the day when the American people will rise up and take a stand against BS from the government, corporations and anyone else that gets in the way of us keeping more money in our pockets. We out number them but they know we won’t fight back and hit them where it’s been hurting us. I guess that would be more like Utopia (Very Heavy Sigh).
Games over
June 20th, 2011
1:59 pm
The reality is that the high achievers and earners are tired of all the pillagers. Instead of using logic on the people that begrudge investors and risk takers, here is a simple story they should be able to relate to .
Ten men go out for beer. The bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:
The first four men (the poorest) would pay nothing. The fifth would pay $1. The sixth would pay $3. The seventh would pay $7. The eighth would pay $12. The ninth would pay $18. The tenth man (the richest) would pay $59.
So, that’s what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. He said, “Since you are all such good customers, I’m going to reduce the cost of your daily beer by $20. Drinks for the ten now cost just $80.”
The group still wanted to pay their bill the way we pay our taxes, so the first four men were unaffected. They would still drink for free. But what about the other six men — the paying customers?
How could they divide the $20 windfall so that everyone would get his “fair share”? They realized that $20 divided by six is $3.33. But if they subtracted that from every body’s share, then the fifth man and the sixth man would each end up being paid to drink his beer. So the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay!
And so:
The fifth man, like the first four, now paid nothing (100% savings). The sixth now paid $2 instead of $3 (33%savings). The seventh now pay $5 instead of $7 (28%savings). The eighth now paid $9 instead of $12 (25% savings). The ninth now paid $14 instead of $18 (22% savings). The tenth now paid $49 instead of $59 (16% savings).
Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.
“I only got a dollar out of the $20,” declared the sixth man. He pointed to the tenth man, “but he got $10!” “Yeah, that’s right,’ exclaimed the fifth man. “I only saved a dollar, too. It’s unfair that he got ten times more than I!” “That’s true!!”shouted the seventh man. “Why should he get $10 back when I got only $2 ? The wealthy get all the breaks!” “Wait a minute,” yelled the first four men in unison. “We didn’t get anything at all. The system exploits the poor!” The nine men surrounded the tenth and beat him up.
The next night the tenth man didn’t show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important.
They didn’t have enough money between all of them for even half of the bill!
And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up any more. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.
Dan Quayle
June 20th, 2011
2:20 pm
Some of this commentary is insane. It’s obvious most people here don’t understand the law. These companies aren’t breaking the law or taking advantage of “loopholes.” They are making sound business decisions. The US just can’t tax profits EARNED overseas. It’s a jurisdiction issue. Just like the US can’t try a French guy for a murder he performs in France. These profits are taxed interationally at a much lower rate and will escape US taxation as long as the funds aren’t repatriated to the US. THAT IS THE LAW!
The issue is should the US allow a holiday to tax a couple hundred billion dollars at 5% or never tax any of those dollars at 35%. Now what would the government do with that influx of cash? Save it? Doubtful. It would probably go towards creating MORE government jobs.
shaggy
June 20th, 2011
2:25 pm
Games over,
A good, true, and very relevant analogy. It’s too bad the wealth envy crowd will not get it. Also, the clock is ticking before those “rich friends” pack it all up and drink overseas.
LD
June 20th, 2011
2:27 pm
A recent Supreme Court decision permits entities–companies, corporations, unions, etc.–to “invest” in our elections–they have not only the “free speach” right that any individual supposedly has, but also their advertising budget (and any political slush funds by any name) IN ADDITION to the individual voices of any persons who are employees or profiting from such entities. (Remember the insurance company ads that were so persuasive?) This is contrary to INDIVIDUAL liberty–the liberty of an individual person– and has existed in practice long before this Court decision, with those who control the large entities and decide whether the employees will continue to be empolyed by the entities making all the decisions as to where to “invest” their campaign contributions. People, this is the reason our economic system is so skewed toward making the rich richer and and the “voice” of the employee class keeps getting weaker. To correct this will require a world war and/or a national scandal of gigantic porportions. The best we can hope for is that this $ overseas issue remains unresolved this year so that it becomes a political debate in the next presidential election and those ‘bought and paid for’ “representatives” of the people in DC are forced to enact a temporary solution that will permit a limited return of this $ for a lower tax rate that REQUIRES that every penny that receives this tax break must be REINVESTED IN THE US. The powers that be will not permit a long term solution that does not meet their greed/need. If the US economy is the issue with which you are most concerned, this is an issue which deserves your attention.
“WE ,THE PEOPLE” have lost control of this country because of voter apathy and gullibility. Too many people don’t vote and too many that do are one-issue voters –that one issue is usually one that enables them to tell others how to live (thus the gullibility)–that, too, is contrary to the basic concept of “individual liberty”. Either something will jolt the citizens of this nation into taking back control of it in favor of “THE PEOPLE” or we will eventually lose the right and ability to do so. I suspect that the “big brother” boogie man that many people fear will turn out not to be government, per se, but rather big business controlling government–that military industrial political complex that Ike tried to warn us about years ago–we’ve already gone to war because our dependence on foreign oil and are losing many rights and freedoms in the name of national security–the “canary in the coal mine” is singing, but too many people are too apathetic or too gullible to the siren song of their superstitions, prejudices, and instant gratification to hear it.
wow!
June 20th, 2011
2:28 pm
The corporate culture works like this, the more money they make the less they want to put back. There is no interest in creating jobs in America because you can create them overseas for less plus probably a fraction of benefits that they have to pay here. Labor laws in other countries are not like ours, they can use child labor and make them work many many hours without paying overtime.
The only folks that will get any benefits are the executives of the companies and the government croonies that will allow it to happen because they will get their palms greased in a very perverse way.
Dan Quayle
June 20th, 2011
2:34 pm
Don’t tax me…Don’t tax me….Tax the man behind the tree.
Screw those b1tch3$
June 20th, 2011
2:40 pm
Screw those b1tch companies, they send millions of jobs to India, Brazil, Manila, Mexico and make billions in profit? Now they want ot bring the money home but leave the jobs. He77 no b1tch, pay up just like I do.
Screw those b1tch3$
June 20th, 2011
2:43 pm
Dan – shut the he77 up
Mmmmm
June 20th, 2011
2:47 pm
Most countries either don’t tax earnings made abroad or it’s about the 5% being proposed. American Corporations need a level playing to compete on a global basis. The individual and corporate tax system needs a complete overall. No resaonable money manager whould ever bring $ home just to give the Governmant 35% to waste. This tax law, as well as many others, discourages invenstment in our own country and promotes corporations to spend overseas providing jobs there instead of here. We are regulating ourselves out of business.
lovelyliz
June 20th, 2011
2:53 pm
But most countries don’t allow for expenses on un-taxed foreign income be written off their tax liability at home.
Don Nelson
June 20th, 2011
3:08 pm
I would put a moratorium on taxes for 10 years, companies must create so many jobs based upon the revenues returned. If they fail, they pay full taxes, if they comply, each year we can access the ROI, if the jobs are not sustainable, neither is tax relief. After 10 years, the rates climb and are based upon the 10 year performance by each company.
Nifty
June 20th, 2011
4:06 pm
@ Galt, how many jobs were lost during the Regan years? The Regan years were our slowest economic growth ever. Healthcare declined. The average income declined while inflation rose. The income gap between the poorest and the richest grew the most in history. Why in the hell would anybody think that these greedy people would bring any type of economic stimulus to the States? They left because they were greedy, and they will only come back if it benefits them. What about the people that helped make their companies? The consumers? We get slighted huh? There is no way in hell that a company that makes millions and billions of dollars should pay less in taxes than a school teacher!
Southern Man
June 20th, 2011
4:54 pm
It’s easy to tell in this article and comment section that our state only requires a half credit in economics for graduation.
Allyanaz
June 20th, 2011
5:01 pm
I think it is “odd” that these companies profit from doing business in the United States while holding jobs in the U.S. hostage.
Dan Quayle
June 20th, 2011
5:27 pm
Anyone ever hear of the tax gap? Google is your friend. Check that out and see who is the biggest culprit of ANNUAL tax deficiencies.
HINT: It isn’t the big, bad corporations.
S
June 20th, 2011
6:46 pm
NO NO NO..everyone has to pay their fair share..time to pay the piper and that goes for all corporations. Corporations have more than a trillion on the books, they do not need a tax break. Time to become American corporations again, instead of offshore tax cheats..
On another note, nothing is happening in Washington because of a Republican/Tea party majority congress that will not vote for anything FOR the American people. Vote those UN American self serving Republican/Tea Party’s out come the next election. We most certainly do not need politicians in office that do not have the American peoples best interest at heart. What is the Republican/Tea Party’s only agenda..Oh yea, make Obama a one term President. Talk about a sorry group of Republican politicians, this group takes the cake..Every Republican President from the past would be ashamed to call themselves Republican, with this group in office.
cp
June 20th, 2011
9:40 pm
http://www.huffingtonpost.com/paul-abrams/middle-class-government_b_855124.html
Bob Slacker
June 20th, 2011
10:31 pm
I made my money the old fashioned way, I inherited it. Daddy put it in a trust fund for me. I am a millionaire who hardly finished High School and I am out of bed by lunch everyday. I love this country!