I’ve been paying attention for months now to the rumblings on Capitol Hill about granting a tax holiday to multinational corporations to allow them to repatriate the billions of dollars in profits they have sitting overseas without having to pay U.S. taxes on those profits. Congress did this only seven years ago, with disastrous results.
So I was quite dismayed the other day to read this article at ThinkProgress.org explaining that Senators John McCain and Kay Hagan have indeed hatched a plan to allow multinational corporations to repatriate these monies at the low, low rate of only 8.25%. What particularly troubled me is the participation of Senator Hagan – she’s a Democrat and, more importantly, she’s my Senator.
So I took the time to draft a letter to her urging that she abandon her support for this idea. I tried to be as respectful and polite as I could be without also sacrificing the necessary tone I thought the situation warranted.
My letter to Senator Hagan is below the fold.
November 11, 2001
(202) 228-2563 (919) 856-4053
Sen. Kay Hagan Sen. Kay Hagan
521 Dirksen Senate 310 New Bern Avenue
Office Building Raleigh, NC 27601
Washington, DC 20510
RE: Your Proposed Corporate Tax Holiday
Dear Sen. Hagan:
I am one of your constituents. I was proud to vote for you in 2008, and very pleased when you won your election. But I am writing to express my extreme dismay upon learning that you and Senator John McCain are now proposing a corporate tax holiday that would allow companies to repatriate enormous sums of money at tax rates far, far below normal.
As I understand it, you want to allow U.S. corporations that so far have not been taxed on this money by the U.S. at all – that is, they already have taken advantage of their ability to defer taxes – to repatriate billions of dollars in profit at a tax rate of only 8.25 percent.
This would be extremely destructive to the long-term American economy, and – respectfully – I cannot understand why you would propose doing something like this.
It cannot be that you think companies will use this money to create jobs. I know that because your plan also allows companies to pay only a 5.25 percent tax rate if they use the money to hire workers. In other words, your plan allows for the repatriation of billions of dollars at the low, low tax rate of only 8.25% with a complete disregard for whether this money is used to put Americans back to work or not.
Moreover, U.S. corporations are right now sitting on billions of dollars in cash for which they have nothing to do. This money is not being used to hire people or to reinvest in the economy because there simply is no demand for additional goods and services – indeed, that is the very nature of a recession and, yes, most Americans are still struggling in a recession. So it cannot be the case that companies who repatriate these billions will pump the money back into the economy – they already have money to do so that is not being utilized.
Simply stated, allowing corporations to bring billions of dollars in profit into the United States at a tax rate of next to nothing, knowing that the money will not be used to invest in the economy or to create jobs, can be considered nothing other than a corporate giveaway – a corporate giveaway of a type we have seen before, and one that carries with it horrible consequences.
Back in 2004 the Chamber of Commerce and the rest of the corporate community lobbied for a “one time” tax holiday that would allow them to repatriate billions of overseas profits at a tax rate of almost nothing. Back then, we were told, this money would be used to create jobs and reinvested in the economy and everybody would benefit.
But that didn’t happen. Instead, corporations brought back billions, paid a pittance into the national treasury, and then spent that money buying back stock, paying out dividends to their investors and, on yeah, paying their executives grossly overinflated salaries and bonuses. It was, essentially, tax free money for the wealthy investor class.
But what was worse was that it set a precedent. The management of multinational U.S. corporations had learned that by parking as much of their companies’ profits in branches overseas they could avoid paying taxes on those profits. All they had to do was wait for another economic downturn and they could lobby for a new “one time” tax holiday to repatriate all that money back into the United States; and then, of course, they could pay it all over to themselves again.
This led to some rather predictable outcomes, the worst of which was that management of the firms that profited the most from the 2004 tax holiday began absolutely shedding U.S. jobs in favor of transferring overseas as much of their firms’ operations as possible. General Electric was probably the leader in shipping jobs overseas – which was, of course, appropriate, since GE was also one of the companies that profited the most from 2004’s “one time” tax holiday.
And now it seems that another “one time” has rolled around and the managers of these corporations are following through on their plan. And they are using you, Senator Hagan, to assist them. They are asking you to assist them in further lining their own pockets, in evading their responsibility to pay back into the system that has nurtured and sheltered them until they have become as wealthy as they are, and they are asking you to help establish a system that rewards the destruction of American jobs.
As a constituent and as someone who has voted for you in the past, I urge you to withdraw your support from this proposal. Let Senator McCain find a co-sponsor from some other state, if he can, to support this anti-worker, anti-American tax holiday for the wealthy.
Please don’t let North Carolina be the state that made it possible to do this to the American people again.