by Adele Stan, Oct 16, 2011
If you listen to anti-worker politicians on the right, you’d think the answer to the nation’s ills lies in tax cuts, and not just the extension of the Bush tax cuts for America’s wealthiest human citizens. Corporate tax cuts are often hailed as the solution to America’s jobs crisis.
But a report issued this week by the U.S. Senate Permanent Subcommittee on Investigations, led by Sen. Carl Levin (D-Mich.), gives lie to that logic with its stark findings that a notable recent effort to create jobs through corporate tax cuts created a multibillion-dollar corporate windfall that did not trickle down to America’s workers, and did not create new jobs.
A law designed to spur new jobs in the United States passed six years ago aimed to do so by allowing U.S. corporations that were holding profits overseas to bring that money back into the United States at an extremely low tax rate. Corporations brought home billions, but did not invest in U.S. operations or create jobs. From the Levin report, titled “Repatriating Offshore Funds: 2004 Tax Windfall for Select Multinationals”:
In 2004, the America Jobs Creation Act (AJCA) permitted U.S. corporations to repatriate income held outside of the United States at an effective tax rate of 5.25 percent instead of the top 35 percent corporate income tax rate. The purpose of this tax provision was to encourage companies to return cash assets to the United States, which proponents of the provision argued would spur increased domestic investment and U.S. jobs. In response, corporations returned $312 billion in qualified repatriation dollars to the United States and avoided an estimated $3.3 billion in tax payments, but the growth in American jobs and investment that was supposed to follow did not occur.
Just this week, only days after the minority party in the Senate used the filibuster to prevent President Barack Obama’s jobs bill from reaching the Senate floor, Sen. Rand Paul (R-Ky.), a tea party favorite, and Sen. John McCain (R-Ariz.), unveiled what they said was a jobs plan. Among its main features is a corporate tax cut. If the Levin report is any indication, the McCain-Paul plan would do little more than fill the coffers of corporations and the wealthy, and next to nothing to create jobs. The plan is believed to have next to no chance of succeeding in the Senate.
The Levin report, “Repatriating Offshore Funds: 2004 Tax Windfall for Select Multinationals,” is available here in a PDF file.