The Robin Hood Republicans in the national Senate and their fellow free-market theologians announced a new devotion to a major jobs package early this month. According to The Hill — a publication that covers Congressional goings-on — this package is expected to create more than 4 million jobs and improve the populace’s perception of GOP domestic economic policy.
But this package, composed of a “litany of bills” currently sitting in Congress, is beginning to look a lot like other Republican solutions to economic difficulties: “Let the godlike free market and our business bed-buddies take care of us.”
In this jobs package, a little-known bill patriotically dubbed the “Homeland Investment Act of 2003” is likely to be included. This legislation, originally intended for inclusion in the Bush tax cut package, would give American corporations a one-year tax break on the “repatriation” of earnings from their foreign subsidiaries.
Currently, corporations can defer taxes on these earnings until they plan to bring the money back to the United States. If and when they choose to repatriate these funds, they must pay a 35 percent tax.
But, the HIA would give corporations a one-time 29.75 percentage point reduction in this tax so they can invest in domestic operations, refund ailing pensions, reduce their debt loads and increase dividends to shareholders.
Proponents of the bill include Oregon Democratic Senator Ron Wyden and Oregon Republican Senator Gordon Smith, Intel, Nike, Hewlett-Packard and a laundry list of tech firms and pharmaceutical companies. They all vigorously support this bill as a key piece of economic stimulus. Its authors claim that this piece of legislation will inject roughly $135 billion into the floundering economy during the first year.
But opponents call this type of measure “corporate welfare.” They argue that, although the United States has one of the highest corporate tax rates in the world, the country’s businesses don’t actually pay at that rate. There are so many tax subsidies and loopholes that many companies don’t even pay taxes at all.
According to Business Week, individuals and businesses basically split the tax burden in 1940, but now corporations foot less than 14 percent of the total bill.
Citizens for Tax Justice reports that a family with a household income of $30,000 has an average tax rate of 17 percent. But in 2000, thanks to said subsidies and loopholes, Enron effectively paid a -39.5 percent tax rate, General Motors paid -1.2 percent and WorldCom paid 2.9 percent.
Corporate income taxes decreased from 4.1 percent of the total GDP in 1965 to 2.5 percent in 2000. During that same time, corporate taxes in other nations belonging to the Organisation for Economic Co-operation and Development increased from 2.4 percent to 3.4 percent. This means that the United States now has the eighth-lowest corporate tax rate among the 29 reporting nations.
Will corporate tax breaks stimulate the economy? Will Peter Pan ever grow up?
Let’s look at some other trends.
The World Trade Organization ruled in 2001 that American business’ use of tax shelters like Bermuda gives them an unfair advantage in the world market. Simultaneously, U.S. corporations complained that the high American tax rate dulls their competitive edge.
Proponents of the HIA say this bill will give them the incentive they need to invest in their domestic operations and will bring their interests back home.
But as the government frees up foreign markets even more, there is actually less incentive to remain in the United States.
Ralph Nader’s CitizenWorks recently reported that, since 1997, the El Paso Corporation has started nearly 190 new subsidiaries in tax havens. Morgan Stanley has 97, Haliburton has increased their number by 50 and even sweet little Sarah Lee added 12 new protected subsidiaries to the company.
Add to tax havens the benefits of outsourcing — moving jobs to other, less expensive nations — and it really looks like corporate America is slipping both politicians and the people the mickey.
The American Electronics Association reported a loss of 560,000 high-tech jobs in the United States from 2001 to 2002, and, according to the Washington Post, the number of temporary jobs rose almost 600 percent from 1982 to 1998. That number continues to grow today.
And look at how badly these companies need the help: Eli Lilly, the pharmaceutical giant that makes Prozac, is not only making our country a happier place; it has more than half of its nearly 30,000 employees based in 160-plus foreign countries, and it reported 17 percent growth in 2001. Several corporations backing the bill are reporting record profits.
Not only does this take valuable tax dollars away from desperate services, but it is re-framing the way we view taxes in this country. No longer are they seen as a necessary and important aspect of social responsibility. Today, taxes are seen as a pox on American progress and a direct threat to individual prosperity.
Like Bush’s tax cuts for the rich, this legislation will put more money into the hands of those who don’t need it. Multinational companies will serve as the middleman, and the American people will have to trust non-human entities to honor a code of ethics not concerned with profits and the bottom line.