Sens. Kay Hagan (D-NC) and John McCain (R-AZ) have announced plans to introduce a bill tomorrow that would let U.S. companies bring home as much as $1.4 trillion of overseas profits at a steeply reduced tax rate.
However, a new report by the Institute for Policy Studies says this proposed corporate “tax holiday” is unlikely to spur any net job growth. Surprisingly, IPS released its report almost simultaneously with a new paper from the conservative Heritage Foundation that draws the identical conclusion. Tax holidays don't create jobs.
“When Heritage and IPS, two think tanks on opposite ends of the political spectrum, actually agree on something, policymakers should take notice,” said Sarah Anderson, a co-author of America Loses: Corporations that Take 'Tax Holidays' Slash Jobs, the new IPS report. “Our solutions to the problem are polar opposites — we want corporations to pay the full existing tax rate while Heritage wants to permanently lower them. But we welcome their honest assessment that the proposed tax holiday will not create jobs.”
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America Loses shows that most of the companies that snagged a big tax break in 2004, the last time Congress gave them this kind of deal, actually reduced their national and global workforces.
In fact, 58 of the large corporations that took tax holidays after the 2004 congressional action went on to shed almost 600,000 workers. This downsizing didn't stem from recession-linked red ink. These 58 companies today maintain combined cash reserves of more than $450 billion.