America’s Recipe For Disaster: How New Corporate “Amnesty” Plan Could Doom The Economy - Salon [View all]

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America’s recipe for disaster: How new corporate “amnesty” plan could doom the economy
This new budget deal could have an ugly underside. Here's how the right's scheming to help corporations avoid taxes
David Dayen - Salon
Tuesday, Feb 3, 2015 03:59 AM PST

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For over a decade, corporations have hoarded profits overseas, basically blackmailing the country into letting them return the money to the United States at a lower tax rate. Now, with the presentation of President Obama’s budget, virtually everyone in Washington agrees this should happen, to “pay” for public works projects; the only real difference is in the details.

This leads to a strange double standard. When undocumented immigrants get a path to citizenship it’s called “amnesty”; when corporations get to keep profits at a drastically reduced tax rate, a literal amnesty from the law, it’s called a sound jobs policy. But the emerging deal could actually reduce investment and jobs, by indicating to corporations that they can dodge taxes and win a special exemption years later.

The first “repatriation tax holiday” occurred in 2004. The United States, unique among developed nations in taxing foreign corporate profits, only collects the tax when those funds are repatriated into the country. In 2004, Congress allowed corporations to bring that money home at a 5.25 percent rate, well below the 35 percent standard.

Supporters said the tax amnesty would spur corporate investment and economic growth. But a 2009 report from the Senate Permanent Subcommittee on Investigations showed that the top 15 companies benefiting from the holiday cut over 20,000 jobs and lowered investment in subsequent years. Most of the repatriated money went to shareholders in dividends or stock buybacks, or to executives in compensation packages.

Once corporations figured out they could successfully lobby for amnesty, they spun more and more of their profits off as “overseas” gains. Multinationals made liberal use of tax havens, and used accounting gimmicks like patent licensing or on-paper changes of their corporate headquarters through “inversions” to move profits into subsidiaries in low-tax countries. By the end of 2013, corporations had more than $2 trillion stashed overseas.

Essentially, these corporations made a bet that they could game the tax code, and use their power and influence to secure amnesty after the fact. It took longer for Congress to comply with their desires. But the stars seem aligned this year.

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More: http://www.salon.com/2015/02/03/americas_recipe_for_disaster_how_new_corporate_amnesty_plan_could_doom_the_economy/