Bloomberg has a story worth reading, today. They report that Google, Apple and Cisco Systems’ lobbying for a tax holiday on offshore profits has just received a big gun.
Bloomberg reports that the technology firms have hired Jeffrey Forbes, “once chief of staff to Max Baucus, chairman of the tax-writing Senate Finance Committee” to lobby for a tax break on more than $1 trillion in profits made in foreign countries.
Through an analysis, Bloomberg found that the companies have hired more than 160 lobbyists for the task that could cost the U.S. government $78.7 billion over ten years. Bloomberg has also put together this handy graphic that shows all of the Capitol Hill connections. (Again, it’s a pretty comprehensive piece that’s worth a click over for.)
What the tech firms argue is that a tax holiday would flood the country with new money that would help spur a sagging economy. The United States did that in 2004.
Needless to say, the move has its critics. The U.S. Treasury put together analysis of what the tax holiday did in ’04. Michael Mundaca, the Assistant Treasury Secretary for Tax Policy, wrote in March:
Although advocates argue that a repatriation holiday could be costless or even raise tax revenue, the official Congressional scorekeeper, the Joint Committee on Taxation, estimated before enactment that the 2004 repatriation holiday would actually cost billions of dollars. In 2009, when this idea was being pushed once again, Senator Baucus indicated during Floor debates that the cost of a new holiday had increased to $30 billion, presumably because a second holiday would encourage further erosion of the U.S. tax base through shifting of profits overseas. Moreover, according to outside estimates, just five firms got over one-quarter of the tax benefits of the repatriation holiday, and just 15 firms got more than 50 percent of the benefits. To pay for giving this large tax cut once again to a small group of U.S. companies without increasing the deficit, we would have to raise taxes on other U.S. businesses.
In assessing the 2004 tax holiday, the nonpartisan Congressional Research Service reports that most of the largest beneficiaries of the holiday actually cut jobs in 2005-06 – despite overall economy-wide job growth in those years – and many used the repatriated funds simply to repurchase stock or pay dividends. Today, when U.S. corporations have ready access to cash they have accumulated and are holding here in the United States, it is even harder to make the case that a repatriation holiday will unlock new investment and job creation.