Apple, Microsoft, Google and other companies are lobbying Congress for a year-long income tax holiday that would allow them to transfer offshore cash to the United States at a lower tax rate, reports “The New York Times” (http://macte.ch/gU0RO). Apple purportedly has US$12 billion waiting offshore.
Under the proposal, known as a repatriation holiday, the federal income tax owed on such profits returned to the United States would fall to 5.25% for one year, from 35%. In the short term, the measure could generate tens of billions in tax revenues as companies transfer money that would otherwise remain abroad, and it could help ease the huge budget deficit, according to the “Times.”
Corporations and their lobbyists say the tax break could help the US’s struggling economy by inducing multinational corporations to inject $1 trillion or more into the economy, and they promoted the proposal as “the next stimulus” at a conference last Wednesday in Washington.
However, critics point out that supply-side economics have failed numerous times in the past and that the money will actually benefit corporate shareholders instead of out-of-work Americans. Congress and the Bush administration offered companies a similar tax incentive, in 2005, in hopes of spurring domestic hiring and investment, and 800 took advantage, notes “The Times.”
Though the tax break lured them into bringing $312 billion back to the United States, 92% of that money was returned to shareholders in the form of dividends and stock buybacks, according to a study by the nonpartisan National Bureau of Economic Research (http://www.nber.org/papers/w15023.pdf). The study found the program “did not increase domestic investment, employment or research and development.”