Senate Report: Firms Took Tax Break, Didn't Add Jobs
Senate Report: No Job Growth From Tax Break
From Associated Press (October 12, 2011)
SAN FRANCISCO -- A new Congressional investigation has found that a "repatriation" tax break on foreign profits in 2004 cost U.S. jobs instead of adding them and helped increase stock buybacks and executive pay in the process.
A report released Tuesday by Senate Permanent Subcommittee on Investigations found that $312 billion in earnings brought into the United States at a low tax rate under the program didn't lead to the kind of job growth and other outlays that corporations had promised.
"There is no evidence that the previous repatriation tax giveaway put Americans to work, and substantial evidence that it instead grew executive paychecks, propped up stock prices, and drew more money and jobs offshore," Sen. Carl Levin, D-Mich., the subcommittee's chairman, said in a statement. "Those who want a new corporate tax break claim it will help rebuild our economy, but the facts are lined up against them."
The report comes amid a contentious push to enact a similar tax break to spur hiring and investment from U.S. companies that make money overseas. The report is certain to add fuel to the fight over the wisdom of another such break.
Levin's group identified the top 15 repatriating companies that took advantage of the 2004-2005 tax break. They included Hewlett-Packard Co., IBM Corp. and other tech companies; Coca-Cola Co., PepsiCo Inc. and other food makers; and pharmaceutical companies such as Pfizer Inc. and Bristol-Myers Squibb Co.
The companies either declined to comment or didn't immediately respond to emailed requests for comment late Tuesday from The Associated Press. H-P did not directly address the report but said the company supports reform of the U.S. tax system.
The top 15 repatriating companies brought back $155 billion in offshore earnings, or half of all the money repatriated as qualifying dividends. After the tax break was enacted, those companies reduced their overall U.S. workforce by nearly 21,000 jobs; their pace of spending on research and development fell slightly; stock buybacks increased; and executive pay increased.
The report concluded that the tax break "encouraged the shifting
of more corporate dollars and investments offshore" and called the
break a "failed tax policy."
Posted: October 2011