Imagine corporations telling you they want to create American jobs in exchange for a tax break. Thanks to a compliant Congress, they get a cheap rate on billions of dollars of profits — and cut thousands of American jobs instead. (Pfizer and Hewlett-Packard come to mind.)
After the turn of the century, hundreds of multinationals, such as Pfizer and H-P, nominally headquartered in the United States had a problem. They had about $300 billion in profits parked overseas. They wanted to bring that money home — a process artfully called repatriation of funds.
Their opponent was the U.S. tax code: To repatriate profits, the code said they’d have to pay 35 cents on every dollar brought home. So they sweet-talked (that’s called lobbying) their friends in Congress (their
hired elected minions) to fix the problem. Their congressional chums were glad to help out by lowering the tax bite to 5 cents for every dollar brought home. The lobbying effort was a good investment: For every buck the corporations spent, they got $220 back.
But the fix created an image problem for members of Congress. If they handed out a 5 percent tax rate on hundreds of billions of dollars, their constituents would label them corporate teat-sucking, barking gongbats. After all, the folks who voted these congressional miscreants into office paid up to five times that rate in income tax in 2010. In the past tax year, if your income was about a mere $8,500, you paid 15 percent in income tax. If you made about $35,000, you paid a 25 percent rate. So you see the political image problem your members of Congress faced.
Ah. Slap a patriotic label on the tax break. And thus was born the American Jobs Creation Act of 2004. The corporations cranked up their reliable K Street lobbying machine and told Americans that this tax break, also known as the Homeland Investment Act, would lead to jobs. Yep, plenty of jobs for folks who need them. How patriotic of very large corporations to think of the little guy. Well, they, um, lied. And they’re about to lie again.
Profits brought home but little used for jobs
Analysts say 92 percent of that $299 billion in repatriated profits did not create jobs. Instead, corporations bought back stock, shaved their debt, bought other companies, and paid out higher dividends to investors. The little guy saw chump change for job creation.
The corporations want to do it again. They want another tax holiday. This time, the lobbying machine has cranked up a campaign called WIN America . WIN stands for “Working to Invest Now” in America. This is their mission:
We have an opportunity right now to strengthen our economy, pay down our debt, put people back to work, and invest up to $1 trillion in America. Currently, there is over $1 trillion earned by American businesses trapped overseas. We strongly support corporate tax reform – it is essential to keeping us competitive. But as Washington works on broader reform – likely to be a long process – an essential first step would be to allow these worldwide American businesses the freedom to bring up to $1 trillion in global earnings home to invest it now into our still fragile economy. Unfortunately, our broken tax system actually penalizes U.S. businesses that want to bring their global earnings to America. We are left with a choice: provide businesses with incentives to invest their global earnings here at home, or preserve the status quo and keep the money overseas. [emphasis added]
A linguistic masterpiece: A repetition of deceit
WIN America proponents say they want to put people back to work. They didn’t do this the first time. Ironically, the Congressional Research Service, which provides analysis to our elected barking gongbats, agrees in a May 2011 study:
A conceptually similar proposal was enacted as part of the American Jobs Creation Act (P.L. 108-357). The provision provided a temporary reduced rate for repatriated earnings, with the condition that the repatriated earnings be used for domestic investment. While empirical evidence is clear that this provision resulted in a significant increase in repatriated earnings, empirical evidence is unable to show a corresponding increase in domestic investment or employment. [emphasis added]
As S&R reported more than two years ago, the nation’s largest corporations shed jobs as they trotted home with about $300 billion taxed at 5 percent.
Why should we believe they’ll create jobs this time? Nobel Prize-winning economist Paul Krugman doesn’t think they will:
[T]here’s a push for a repeat of this disastrous performance. And this time around the circumstances are even worse. Think about it: How can anyone imagine that lack of corporate cash is what’s holding back recovery in America right now? After all, it’s widely understood that corporations are already sitting on large amounts of cash that they aren’t investing in their own businesses. [emphasis added]
Yep. A few weeks ago, the Wall Street Journal reported that non-financial firms in the S&P 500 had — get ready for this — $1.2 trillion in cash. That’s 59 percent more — more — than the $703 billion in cash they had in 2008. And these guys want to bring home, they say, another trillion bucks at 5 percent? To create jobs?
Cutting jobs while profits high
Now, this is simplistically put, but …
The United States has a jobless rate of more than 9 percent because corporations and businesses large and small cut jobs — the larger the corporation, the greater the job cuts. That’s how people become unemployed.
Corporations have a large hoard of cash. If they chose to do so, they could create jobs right now and reduce the nation’s unemployment rate. But they say “demand” is too weak. Bah — put people back to work. They will spend money. Demand will follow. They will return to their status as taxpayers.
Yet these corporations that wish to repatriate a trillion dollars cheaply, these corporations with a trillion bucks in cash on hand, these corporations that have said in writing that they wish to put people back to work, are cutting jobs right now while enjoying high profit margins. From The Washington Post‘s Jena McGregor last month:
On August 1, global bank HSBC said it would cut 25,000 jobs between now and 2013, on top of thousands more previously announced. On July 29, pharmaceutical giant Merck said it would be shedding up to 13,000 jobs. Defense contractor Lockheed Martin has also been trimming thousands of jobs. Such mass cuts were enough to drive the number of planned layoffs to a 16-month high … The number of announced job cuts in July reached more than 66,414—up 60 percent from this June and 59 percent from July 2010. At the same time, many companies have been reporting healthy profits.
We live in an age when “the top 0.1 percent of earners took in more than 10 percent of the personal income in the United States, including capital gains, and the top 1 percent took in more than 20 percent,” according to The Washington Post. We live in an age when 25 chief executives of the nation’s largest companies were paid more than the companies shelled out in federal income tax. (See The New York Times‘ compendium on executive pay.)
We live in an age of the transfer of wealth and power from 312 million of us to a few hundred. In fact, you need only your fingers and your toes to count the wealthiest and most powerful among us. And they are not members of Congress.
The meanest deceit: Not telling how many U.S. jobs are created
Such extreme transfer of wealth bothers me (although not as much as it does some liberals and progressives). But that’s not the issue here.
Corporations are telling us they want a tax break from 35 percent to 5 percent to bring home profits from overseas. They say they will create jobs.
But they will not tell us if they created any U.S. jobs. Thanks to The Post‘s Jia Lynn Yang, we now know the depth of corporate deceit:
Some of the country’s best-known multi-national corporations closely guard a number they don’t want anyone to know: the breakdown between their jobs here and abroad.
So secretive are these companies that they hand the figure over to government statisticians on the condition that officials will release only an aggregate number. The latest data show that multinationals cut 2.9 million jobs in the United States and added 2.4 million overseas between 2000 and 2009.
Some of the same companies that do not report their jobs breakdown, including Apple and Pfizer, are pushing lawmakers to cut their tax bills in the name of job creation in the United States.
But experts say that without details on which companies are contributing to job growth and which are not, policymakers risk flying blind as they try to jump-start the hiring of American workers. [emphasis added]
Yep. Corporations won’t tell us about creating jobs in America. Yang reports that companies have recently stopped putting jobs numbers in annual reports. One company has flatly lied about tracking jobs data, Yang reports:
You won’t find Procter & Gamble’s U.S. head count in its filings, either. When initially asked for the number, company spokesman Paul Fox wrote in an e-mail: “We do not track nor report U.S.-specific jobs numbers vs. jobs overseas.” After it was pointed out that P&G’s chief executive, Bob McDonald, had cited such figures in a Cincinnati Enquirer op-ed piece, Fox acknowledged the company did track that data. The number of U.S. employees is 35,000 out of 127,000 total, or 28 percent.
Among those refusing to report job numbers, reports Yang, are Hewlett-Packard, AT&T, Apple, and Pfizer.
Apple and Pfizer are listed as supporters of WIN America. In 2004, H-P repatriated more than $14 billion through the American Jobs Creation Act for, it said, “strategic acquisitions.” In 2005, H-P said it would lay off 14,500 workers.
Proctor & Gamble brought home more than $10 billion seven years ago. Pfizer repatriated $37 billion, then whacked 10,000 jobs, about 10 percent of its workforce.
The WIN America mission euphemistically describes corporate profits overseas as trapped by a broken tax system that penalizes U.S. businesses. No. They could choose to bring home about $650 billion, paying the 35 percent rate, rather than about $950 billion at 5 percent. It’s a choice.
They just don’t want to pay the top tax rate. Period. The wool pulled over American eyes is the promise to create American jobs.
They didn’t, and they won’t. Call your member of Congress. Tell him or her to demand corporate accounting of U.S. jobs created — or no tax break.