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Tax Repatriation Holiday

The U.S. Chamber’s Tax Repatriation Holiday

Windfall for the CEOs of U.S. Chamber Member Companies, Not Jobs For American Workers

A Report by U.S. Chamber Watch
April 2011
The top officials of the U.S. Chamber of Commerce have named job creation as the top priority of the U.S. Chamber in 2011. Yet the policies it supports have consistently revealed this declaration to be nothing but empty words – time and again, the favored policies of the Chamber actually kill jobs, but allow the U.S. Chamber’s top few member companies, and the CEOs of those companies, to benefit.
Recently the U.S. Chamber has again gone on record in support of a “tax holiday,” which would allow multinational firms with foreign subsidiaries to repatriate earnings at much lower tax rates than the current corporate rate.   Following the active lobbying of the U.S. Chamber, the United States enacted a similar repatriation “tax holiday” in 2004. This report examines the results of the 2004 experience, as well as the current debate.  The facts show that far from creating jobs, tax repatriation merely allowed an outlet for Chamber member companies to offshore U.S. jobs and reap personal windfalls for their CEOs.  In particular:
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  • Despite claims by the U.S. Chamber to the contrary, the tax repatriation holiday in 2004 did not create jobs in the United States.  Instead, it created an estimated windfall of well over $250 million for the CEOs of U.S. Chamber companies who benefited from stock buybacks after the repatriation.

  • Of the top 105 companies that repatriated earnings, 22 have direct ties to the U.S. Chamber or its affiliates.  These companies repatriated over $133 billion in earnings.

  • Not only did repatriating companies not create jobs, some even cut jobs in the United States.  Five of the U.S. Chamber-affiliated companies for whom jobs data is available repatriated over $16 billion in foreign earnings but cut over 70,000 American jobs.

  • Research shows that 92% of overseas earnings repatriated by companies went to shareholders, mostly through stock buybacks.  Such buybacks – which Warren Buffett called “foolish” – typically benefit only those shareholders able to capitalize on short-term impacts, often at the expense of investors interested in long-term growth and investment that leads to job creation.

  • Since executive compensation is often either linked to measures inflated by buybacks or comes in the form of stock options, these stock buy backs have been have been called “backdoor compensation” for corporate executives.

  • Many CEOs of U.S. Chamber companies who repatriated earnings and conducted stock buy backs executed stock options, thereby increasing their net worth.

FULL REPORT [updated 4/29/11]