For Immediate Release
Lacy MacAuley, Institute for Policy Studies,(202) 445-4692, email@example.com
Senate Report Reinforces IPS Research on Tax Dodging, Excessive Executive Pay, and Layoffs
WASHINGTON - The Senate Permanent Subcommittee on Investigations has released a report that underscores the findings of two recent Institute for Policy Studies reports connecting corporate tax dodging with excessive executive pay and worker layoffs.
The Subcommittee focused on the top 15 beneficiaries of a 2004 tax holiday for companies that repatriated offshore profits. Despite promises that the tax break would lead to job creation, the 15 firms eliminated more than 20,000 American jobs in the three years following their tax windfall.
In the October 4 report America Loses: Corporations That Take “Tax Holidays” Slash Jobs, IPS researchers examined a larger sample of tax holiday beneficiaries and tracked their layoff records over a longer time period to evaluate long-term job creation impacts. The results were similarly disappointing: 58 corporations which accounted for 70% of the amount repatriated collectively laid off nearly 600,000 workers in the seven years since the 2004 tax holiday.
In addition to the Senate Subcommittee and IPS, the Heritage Foundation also recently issued a paper with the conclusion that tax holidays do not create U.S. jobs. “There is a well-founded skepticism about the assertion that these tax holidays will create jobs,” said Chuck Collins, report author and a senior scholar at the Institute for Policy Studies. “When researchers on opposite sides of the political spectrum agree, hopefully Congress will take notice.”
Senators John McCain (R-AZ) and Kay Hagan (D-NC) claim they have addressed the jobs concerns in a new tax holiday bill, introduced The Foreign Earnings Reinvestment Act. This new bill would allow funds to be repatriated with no strings attached at a 8.75% rate, and a discounted 5.25% rate for firms that increased their total domestic payroll by ten percent over 12 months. The threshold for receiving the preferential rate for “job creators” could be met by increasing the pay of existing employees, or bringing in-house, functions currently outsourced to consultants or third-party vendors in areas like security and food service. In addition the bill would impose a penalty on firms that laid-off workers within two years.
“The incentives for job creation in the Hagan-McCain bill are so lax, that a firm could increase their payroll, without a single new job being created,” according to IPS Associate Fellow Scott Klinger. “Regarding the penalty for layoffs, requiring companies to declare $75,000 in net income for each job destroyed sounds significant but on an after-tax basis it really costs companies at most $26,250 per lay-off,” Klinger explained. A corporate coalition formed to push for a new tax holiday, the WIN America campaign, is continuing to argue that a new tax holiday will create millions of new jobs. Their message is amplified by a $50 million lobbying effort, which supports 160 registered lobbyists.
The Senate Subcommittee report also found that the top 15 tax holiday beneficiaries jacked up pay for their top executives by 65% between 2004 and 2006. That steep rise for the tax dodging CEOs ran counter to declining executive pay among CEOs heading large corporations during the period, according to IPS.
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