Our corporate-friendly White House is now taking another step to enrich the moguls of corporate America. It applies to the billions of dollars that American corporations hold in countries that are established “tax havens.” They keep these billions in these foreign countries because if the money were repatriated to the United States, the corporations would have to pay a tax of 35%.
The White House has decided to declare a one-year tax holiday for such corporations that would like to put their billions to work in the United Sates but do not wish to pay the going rate. During the “tax holiday,” they only will have to pay a tax of 5.25%.
This should not come as a surprise for those acquainted with Bush’s record of tax cuts for the rich. But coming as it does when the United States Department of the Treasury is groaning and moaning over its increasingly unbearable budget deficits and the backbreaking mountain of accumulating debt, this latest giveaway to a privileged few seems unseemly. It comes at a time when the Treasury is cutting back on funds to the states for Medicaid, and cutting back on federal support for public housing, education and health care, in order to maintain sound environmental standards.
However, will the tax holiday really entice any corporations to take advantage of this golden opportunity? You bet! It already has begun to happen. Schering-Plough is repatriating $9.4 billion. Eli Lilly and Company is doing the same, to the tune of $8 billion. The congressional Joint Committee on Taxation estimates that in the long run, the tax holiday will cost the government some $4.3 billion. Other estimates put the sum at a much higher level.
So why is the government doing this? It offers a high-minded reason. It is disclosed in the very name of the act that is entitled the American Jobs Creation Act of 2004. The expectation that the inflow of capital will spur job creation is based on the nutty and naughty notion sometimes called “drip down,” which is based on the belief that the best way to help the folk in the ditch is simple. It’s done by enriching the rich.
But has that theory really worked out? It has, within our lifetime, been tested and tried, and has proved repeatedly to be a sales pitch beloved by the richest — but with an adverse effect on the rest of us. When the Bush administration passed its tax cut, it did serve to “enrich the richest.” But it also was supposed to add some 5.5 million jobs by 2004. It was called a Jobs and Growth Plan. In fact, however, the promise fell short by 3.1 million jobs.
As of January, 29 of the 50 states actually had fewer jobs than when the Jobs and Growth Plan was initiated.
So what do these corporations that are taking advantage of the tax holiday doing with their millions and billions? It appears that in these days of mergers and acquisitions, they are allocating huge chunks of their newfound wealth in playing the game of mergers and acquisitions. This game is turning America into a nation in which fewer and fewer own more and more of the corporate facilities. And typically, when corporations merge, they invariably fire employees to avoid duplication of personnel.
In the light of the foregoing, it does appear that calling the tax holiday the American Jobs and Growth Act of 2004 is a mocking misnomer.