Sen. Carl Levin (D-Mich.) told reporters Tuesday that tax cuts for offshore US companies will stifle job creation, deficit reduction, and tax equality
Levin cited a recent report, released by the Permanent Subcommittee on Investigations examining the top U.S multinational corporations that repatriated the most funds in response to 2004 legislation granting a “tax holiday.” With regards to employment, these companies, Levin stated, “reduced their overall workforce by nearly 21,000 jobs” since 2004.
For example, Oracle, who benefited the most from these tax cuts, reported increased employment with their repatriated funds when in fact the company used the money saved to buy two companies and then proceeded to eliminate thousands of jobs. Oracle reported the remaining employees of those two companies as increased employment within the company.
Instead of companies increasing research investments, the report found that the top 15 companies, which received $155 billion in repatriated funds in 2005 and 2006, showed no change in net research investments and in fact decreased funding for two years.
The original repatriation tax bill allows US companies to return offshore earnings to America at an extremely low tax rate, in the hopes of spurring research investments and increasing employment.
Proponents of the current 5.25% tax break point to an initial boost in fiscal year budget as proof of the bill’s benefits. However, the report found that compared to a normal tax rate of 10.5%, the Federal fiscal year budget, by year ten, would lose at least 37 billion dollars in tax revenue.
In addition, The 2004 law prohibited using repatriated dollars on stock buybacks or executive compensation yet the the top 5 executives at these companies increased their salaries by 27% from 2004-2005 and 30% from 2005-2006.