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If a kid steals a cookie, does it make sense to give him another and then hope that he won't do it again? An army of corporate lobbyists on Capitol Hill is trying to convince Congress that after stashing nearly $1.4 trillion offshore to avoid paying the U.S. taxes they owe, they should get a massive tax discount for bringing the money back to America.
The last time Congress gave corporate America a "repatriation holiday," or tax amnesty, in 2004, despite promises of job creation, the firms that benefited most actually shed jobs, bought their own stock to boost the price, and increased executive pay. Eagerly anticipating the next holiday, they then shifted even more profits offshore. Small businesses and ordinary taxpayers who can't afford high-priced attorneys or accountants were left to foot the bill.
Over 80 of America's largest 100 publicly traded companies make use of tax havens, which, all told, cost American taxpayers $100 billion a year in lost revenue. Some of these offshore subsidiaries are nothing more than P.O. boxes. In fact 18,857 "corporate headquarters" are registered at a single address in the Cayman Islands. With an army of close to 1,000 lawyers and accountants in its tax department, General Electric managed to pay zero dollars in U.S. taxes on its American profits in 2010.
Here in Massachusetts, to make up for the corporate tax dodgers, the rest of the state's individual tax filers had to pay over $3.2 billion in 2010, according to a study done by MASSPIRG. That breaks down to each taxpayer paying an extra $608 on average, the sixth highest amount in the country. If a corporation benefits from American education, infrastructure and national security, it should pay the taxes it owes to America.
While a tax amnesty for corporate tax dodgers is wrong on principle, research shows that it also doesn't help the economy. The Senate study found that the 15 companies that "repatriated" or took advantage of the tax amnesty for the most amount of money in 2004 actually shed nearly 21,000 jobs. The companies didn't use the extra cash to invest in research and development either. So where did the money go? According to the study, these same top firms markedly increased stock buy-backs and upped executive pay by nearly 60 percent in the two years following the tax holiday.
At the end of the day, the only clear effect the last corporate tax amnesty had on the economy was to encourage companies to shift even more of their profits offshore. According to a study by the Congressional Research service, the nonpartisan research arm of Congress, firms that took most advantage of the tax amnesty last time have increased the amount of cash stashed offshore by 81 percent. It's clear what lesson they learned.
One of the strangest things about the renewed push for a tax amnesty is that the army of at least 160 corporate lobbyists fighting for it is pressuring our own Sen. John Kerry, and his fellow Super Committee members, who are charged with cutting the deficit, to include it in its recommendations. They're undeterred by the non-partisan Joint Committee on Taxation's finding that a tax amnesty will add $78.7 billion to the deficit over the next 10 years.
The facts speak for themselves. A corporate tax amnesty is nothing more than a giant giveaway to the wealthiest American corporations that use offshore tax havens. It will encourage companies to engage in more of the same tax-dodging behavior and force small businesses and individual taxpayers to pick up the tab of the extra tax burden. Congress needs to keep the cookie jar closed, and not let the American taxpayer get fooled again.
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