Don’t Fall for ‘Nigerian Scam’ on Overseas Profits
Lobbyists are storming Capitol Hill, pushing a tax holiday that would give billions of dollars in tax breaks to less than 1 percent of American businesses – and stick the other 99 percent with the bill. But of course, they can’t say that. So tax holiday advocates are using a high-powered version of the email con known as the “Nigerian scam.”
You’re probably familiar with it: A prince, business executive or government official promises rich rewards for your urgently needed assistance to move “funds which are presently trapped in Nigeria” or some other country into the United States. “The con works by blinding the victim with promises of an unimaginable fortune,” the myth-busting Snopes.com explains. “He fails to realize during the sting that he’s never going to get the promised fortune.” He’s going to lose his shirt.
“Currently, there is over $1 trillion earned by American businesses trapped overseas that could be brought back and invested here at home,” the WIN America campaign for a tax holiday on “repatriated” corporate profits says in its mission statement. “There is no time to waste, our economy needs all the help it can get.”
Never mind that the money “trapped” overseas was moved by U.S. corporations to their subsidiaries in the Cayman Islands, Switzerland and other tax-haven countries in order to avoid taxes. As former Treasury Department economist Martin Sullivan told Bloomberg, “A lot of what companies report as foreign profit is really U.S. profit that should be subject to U.S. tax.”
For example, “Cisco transfers a portion of the patent rights to technology developed in the U.S. to a Dutch unit, which sells some of the resulting products back to its parent for eventual distribution in the U.S.,” Bloomberg reported. “Cisco credits about $5 billion in U.S. sales annually to the Netherlands.”
Cisco, Google, Pfizer and other big businesses in the WIN America campaign have deployed more than 160 lobbyists to convince Congress to let U.S. multinationals pay a “repatriation” tax rate as low as 5.25 percent. It would tilt the playing field even further against small businesses hiring, investing and paying taxes in America.
Most tax holiday legislation co-sponsors have received campaign donations from WIN America-affiliated companies, reports the Center for Public Integrity.
Congress already fell for this scam with a “one-time” tax holiday passed in 2004. Companies didn’t create the jobs or investment they promised — layoffs actually increased.
Instead, they boosted CEO pay, stock buybacks and shareholder dividends, and stockpiled even more money offshore to avoid taxes, according to reports by the Senate Permanent Subcommittee on Investigations, Congressional Research Service, National Bureau of Economic Research and others. Since 2004, the amount of earnings by U.S. corporations held offshore has more than tripled.
“Another temporary holiday may condition U.S. multinationals to never routinely repatriate any foreign profits because, eventually, Congress can be expected to pass another ‘temporary’ tax holiday,” said a Goldman Sachs report.
As more people understand that another tax holiday would be bad for the U.S. economy, advocates are pitching a variation on the “I’ve got a bridge to sell you” scam that notorious con men like George C. Parker foisted on gullible buyers.
You can use our tax holiday to fund an infrastructure bank to buy bridges, roads and other public works, the hucksters pitch. In this crazy math, a tax holiday that the congressional Joint Committee on Taxation says will cost the U.S. Treasury $42 billion to $79 billion is supposed to finance an infrastructure bank.
If you believe that, I’ve got a bridge to sell you.
Here’s a real way to fund an infrastructure bank with a tax haven link: enact the Stop Tax Haven Abuse Act. That would put into the U.S. Treasury $100 billion a year that is now being lost to tax dodging through tax havens.
That would mean real money for rebuilding our infrastructure and other national priorities, which would strengthen Main Street business, job creation and our economy.
“We can’t afford the waste of another massive corporate tax break that rewards those who have made an art form of avoiding their tax responsibility through tax havens and other accounting manipulation,” says Dean Cycon, owner of Dean’s Beans coffee company.
America has suffered enough from corporate con artists.
Originally distributed by McClatchy-Tribune News Service
© 2011 Holly Sklar