Tax breaks for big corporations: a national scandal

From the NY Times:

So much for that corporate tax holiday's acting as a job creation stimulus. A month ago, Hewlett-Packard announced it would lay off 14,500 workers by November 2006. Meanwhile, the company is about to repatriate $14.5 billion in profits it has in overseas accounts at a measly tax of 5.25 percent - an 85 percent discount off the normal corporate rate. The cut-rate repatriation, offered by Congress to American companies that bring profits held in foreign lands home in 2005, was sold to the public as a one-shot deal to generate cash for new hiring. But as its critics warned, the tax cut is functioning instead as a handout for America's most profitable companies.

Hewlett is just one example. Normally, the tax on a $14.5 billion repatriation would be about $5 billion. Because of the bargain rate in 2005, Hewlett expects to pay roughly $800 million. Hewlett also expects its layoffs to cost the company about $1 billion. Thus, in Hewlett's case, the tax holiday has not only failed to create jobs, but has also more than covered the cost of cutting workers from the payroll.

Dozens of other companies are also bringing billions home with no mention of new hiring. Pfizer, which plans to repatriate $36.9 billion, has, like Hewitt, announced layoffs. Pfizer hasn't said how many jobs it will cut, but analysts expect about 10,000. It also recently announced a multibillion-dollar stock buyback. Ditto for PepsiCo, which plans a $7.5 billion repatriation. Stock buybacks, which enrich shareholders by increasing earnings per share, are not approved as a direct use of repatriated funds. But Congress wrote the law in a way that gives companies broad flexibility in spending their money.

So the whole job creation thing was a fig leaf. The tax holiday is another big giveaway, courtesy of lawmakers who were overeager to please their corporate constituents and desperate for a shot of tax revenue after they'd blown a hole in the budget with excessive tax cuts for the rich. (The holiday is inflating tax revenue this year, but it is projected to reduce it in the future because companies will use the tax break in 2005 rather than repatriating profits at the normal rate later on.)

Worse still, the tax holiday legitimates the gaping loopholes that let American companies amass profits abroad in tax havens like Ireland, Bermuda, Luxembourg and Singapore. Meanwhile, employment growth is still well below historical norms, the federal budget languishes in the red, and deep cuts are being readied for government programs. If Congress were serious about tax fairness and raising revenue, it would close the loopholes, not reward the companies that exploit them.

JESUS H. CHRIST. What has America come to? Government of the rich people for the rich people by the rich people?