So let me get this straight: Big corporations nominally based in America want a “repatriation holiday” for the vast profits they have parked overseas. Microsoft alone has $29 billion. Under the plan being pushed by big business interests, the government would drop the tax rate from 35 percent to 5.25 percent. It’s being billed as a “stimulus” because it would allegedly give the government at least a short-term boost in revenue.
Many things are wrong with this idea. When it was tried under the Bush administration, almost all the profits went to stock buybacks and dividends. Far from using the money to hire Americans, as the current proposal is being sold, the corporations last time were busy cutting U.S. payrolls and hiring overseas.
In addition, large corporations have huge departments whose only job is ensuring that they pay as little in taxes as possible, as detailed in David Cay Johnston’s must-read book, Perfectly Legal. As a result of these evasion schemes, a General Accountability Office study found that between 1998 and 2005, 55 percent of large corporations paid no tax at all. Few pay the statutory 35 percent. General Electric, whose CEO Jeff Immelt is President Obama’s economic advisory panel, paid no federal taxes last year. (GE Capital was one of the biggest beneficiaries of the TARP bailout, with much fewer strings than were placed on banks).
So far, most of these big companies have shown little desire to hire in the wake of the Great Recession — at least at home; they are hiring and building overseas. There’s always an excuse — new regulations, taxes, uncertainty — as if they didn’t already own outsized influence in the Congress and White House and as if anything is certain. These playerz are citizens of the world, you know, very different cats from the corporations that operated when the American economy was at its zenith.
The rules are different for everybody else, including small- and medium companies (although the effective tax rate is 27 percent, not 35 percent, and the corporate tax burden as a percentage of GDP is lowest among the OECD nations). As the Center for Budget and Policy Priorities points out, even low-income households pay federal taxes. (Even so, the federal tax burden is at a 60-year low — hello, deficit hawks).
Today’s Econ Haiku:
Wal-Mart’s bargain deals
Extend to the Supreme Court
Here’s your happy face