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Archive for September 1st, 2011

The tax break that didn’t create jobs, and now corporations want another one

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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.
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Written by Dr. Denny Wilkins

September 1, 2011 at 12:23 pm

Posted in Uncategorized