October 6, 2005

Massive Offshore Tax Giveaway

As mentioned here, I, too, would like the 5.25% tax rate that our good Senators Russ Feingold and Herb Kohl supported (to repatriate foreign profits via a one year tax break). Timothy Aeppel looks at the results:

But it's far from clear whether the spending has spurred the job growth that backers of the break touted.

A law signed by President Bush shortly before the 2004 election allows companies to transfer profit from overseas operations back to the U.S. this year at a special low tax rate of 5.25%. Businesses often keep such funds outside the country in part to avoid paying taxes in the U.S., where the effective rate on repatriated profit for many companies is normally closer to 25%. Backers said the measure would provide an incentive to companies to invest those funds in U.S. operations.

Most companies using the break have offered only broad outlines for how they intend to use their windfall. For the most part, they say they are using the bulk of the money for tasks such as paying down debt and meeting payrolls. Direct job creation rarely appears on the list.

Some companies are even bringing home piles of cash while continuing to downsize. Colgate-Palmolive Co., of New York, said in July that it planned to repatriate $800 million, at a time when the company also is pursuing plans to shut a third of its factories and eliminate roughly 12% of its work force, or 4,450 people, over four years.

Posted by James Zellmer at October 6, 2005 12:01 AM | Subscribe to this site via RSS:
Posted to Taxes