George W. Bush’s presidency is among the most destructive and corrupt of any American Presidency. Beginning with the stolen election, Dubya led the country into two, practically unilateral and illegal wars while pulling out of the multi-nation Kyoto Protocol. Bush and his Republican Congress (along with some Corporate Democrats) cut taxes and deregulated Wall Street, a policy transformation that upended record surplus into a record deficit and culminated in the worst economic crash since the Great Depression. And then there was Katrina, Gitmo, Blackwater, Abu Ghraib, and of course, Alito and Roberts.
Lost in so much scandal is the memory of Bush’s 2004 Repatriation Tax Holiday, awarded to Corporations that had squirreled away profits in overseas bank accounts to avoid paying US income tax. In order to entice companies to “re-patriate” those profits, Bush allowed them to pay a discounted 5.25% tax instead of the typical 35% corporate tax rate, promising Americans that the discount would benefit them by stimulating the American economy, creating thousands of jobs. As a result of that holiday, 843 companies brought back $312 billion, according to the Internal Revenue Service.
But instead of going on a hiring binge, or investing in research and development, or perhaps paying their workers more, the companies used most of the repatriated profits to buy back stock shares and issue dividend payments that larded already bloated CEO salaries. In fact, according to economists Chuck Marr and Brian Highsmith, “many firms actually laid off large numbers of U.S. workers even as they reaped multi-billion dollar benefits from the tax holiday and passed them on to shareholders.” The Wall Street Journal reported that this tax holiday cost the government $3 billion in lost revenues in the ten years since it was implemented.
But at least this tax holiday stopped the flow of corporate profits overseas, because legislators had the foresight to close the loopholes that caused offshoring of profits to avoid taxes. Sorry, not true. There were no claw backs in the tax holiday to prevent this from occurring once again. Since then, companies have once again stowed away almost $2 trillion in profits overseas by some estimates New York Times.
So what do Libertarian Rand Paul and Liberal Lion Barbara Boxer propose we do on the ten year anniversary of The Bush Tax Holiday? Why, give corporations like GE, Apple, Google and others another Tax Holiday!
I’m referring here to Invest in Transportation Act of 2015. The Boxer/Paul plan is different from Bush’s in that it proposes to use the taxes raised from the repatriated money to fund the nearly bankrupt highway trust fund – which makes it appealing to both Democrats and Republicans alike (no new taxes, money for infrastructure and jobs). Barbara Boxer is not up for re-election, so this is no political stunt. This is all her. And Google, Apple, Qualcomm, and other corporations in her district who have lobbied hard for several years for another tax holiday (and have heavily donated to her campaigns)
The irony here is that corporations aren’t even making the argument that they need this in order to create jobs. US companies are so flush with capitol, they do not need these profits to re-invest, expand research or otherwise stimulate the economy. Quite simply, their only interest is lower taxes and greater profits.
The injustice here is folks like you and I do not get to negotiate a lowered tax rate for income we hide in a Swiss Bank account. Boxer, Paul, as well as Bill Clinton who has been lobbying for such a holiday repeat since 2011, are now capitalizing on the urgency of our nation’s crumbling infrastructure to justify another tax giveaway to the 1%.
Obama is on the record of supporting similar proposals in the past, and Congresswoman Cheri Bustos (IL-17) is touting this as a solution to the lack of funds for infrastructure – which will certainly be appealing in her heavily union district as infrastructure investments means jobs. But this formula is penny-wise and dollar-foolish. The nonpartisan Joint Committee on Taxation estimated that the holiday would boost tax revenue by an estimated $20b to $30b in the first two years it’s implemented. But after that, it would lose as much as $118 billion over the next decade.
But as with Bush’s holiday, there is no provision in the current bill that would prevent corporations from off shoring their profits yet again. Nor is there any companion bill to increase the federal gas tax (which hasn’t been raised in over 23 years) to prevent the Highway Trust Fund from future insolvency.
With Federal highway program set to expire May 31, both neoliberal Democrats and deficit hawk Republicans will continue to suggest the tax holiday as a solution. But to continue to reward unpatriotic companies with another tax holiday will do nothing to stop them from once again off-shoring their profits as they anticipate another, future Congress to repeat this same sad cynical cycle. It’s highway robbery this time. Perhaps next time, they can tie it to Veteran’s healthcare funding, education funding or another essential underfunded program.
Fool me once…
iowa afl-cioTracy Leone
Organizer – Iowa Federation of Labor