With 25 million Americans looking for fulltime work, and nearly one in six Americans relying on federal food assistance, some of America’s most flush corporations are demanding a “one-time” corporate tax holiday on their more than $1.4 trillion in profits now sitting offshore.
Bringing this enormous cash stash back home, some of the corporations argue, will stimulate the economy more cost-effectively than President Barack Obama’s more direct approach to job creation. “Repatriation,” the argument continues, will free up billions upon billions of dollars that are “trapped” overseas by excessive federal tax rates.
Do corporate advocates for repatriating overseas profits have a legitimate case? Not anymore. The federal government has already gone the “tax holiday” route — in 2004 — with disastrous results.
Congressional advocates for that 2004 “onetime” holiday made the same arguments that repatriators are making today. They promised that the tax holiday would create jobs. In fact, they even named their holiday legislation the “American Job Creation Act of 2004.” But their holiday didn’t just fail to create the promised jobs. Their holiday enriched corporations that actually destroyed jobs in the months right after they received their tax windfall.
One government study looking at the first two years after the repatriation windfall found that 12 of the top recipients laid off more than 67,000 American workers. These firms collectively brought back home more than $100 billion, nearly a third of the total amount repatriated by all firms that took advantage of the tax holiday. Collectively, these early job killers pocketed an estimated $32 billion in savings from taxes they otherwise would have had to pay.
A review of U.S. employment data filed with the Securities and Exchange Committee found that 13 firms profiled in this report cut their U.S. workforces by 60,701 jobs in the two years following the 2004 tax holiday (2004-2006). The 13 companies are YUM Brands, General Electric, International Paper, Eastman Kodak, Kraft, Honeywell, Intel, Eli Lilly, Starwood Hotels, Praxair, Lexmark International, Hasbro and Boston Scientific.
But this wave of job destruction soon after the 2004 tax holiday went into effect, reported fairly widely at the time, does not tell the entire story. Dozens of major U.S. corporations that benefited lavishly from the 2004 tax holiday, not just the early job destroyers, have downsized significantly in the years since. Their story deserves telling — but certainly not repeating with the passage of still another “one-time” corporate tax holiday.