Is there a more terrible idea getting serious play in policy circles than a corporate "tax holiday"? That's when corporations that have put off paying American taxes get a one-shot chance to move that money into the US at the steeply discounted rate of 5 percent. Kevin has dismissed the proposal as a "scam," but I wanted to point out a new Center for Budget and Policy Priorities report thoroughly dismantling the idea.
Proponents—like the WIN America campaign, a group backed by major pharmaceutical, energy, and technology corporations—claim a new tax holiday will "strengthen our economy, pay down our debt, put people back to work, and invest up to $1 trillion in America." But the last tax holiday, in 2004, did nothing of the sort, CBPP says. "The evidence shows that firms mostly used the repatriated earnings not to invest in US jobs or growth but for purposes that Congress sought to prohibit, such as repurchasing their own stock and paying bigger dividends to their shareholders," the report's authors write. "Moreover, many firms actually laid off large numbers of US workers even as they reaped multi-billion-dollar benefits from the tax holiday and passed them on to shareholders."
Here are three more solid reasons why tax holidays are a dumb idea, per CBPP:
It seems that a tax holiday would have, in the long term, the opposite of its intended effect: it would encourage companies to shift cash out of the US. It's hard to see any upside whatsoever for American workers—or the American economy at all, really—from another tax holiday. That is, unless you're a member of Congress who depends on hefty campaign donations to stay in Washington. In that case, a tax holiday is exactly what the doctor ordered. I've even drafted a working title for such a piece of legislation: "The Keeping Corporations Happy and the Contributions Rolling In Act of 2011."
A mouthful, yes. Anyone else have a better name?