Corporate Tax Amnesty

James Kwak tells why the corporate foreign income repatriation is a bad idea:

So if no one could propose a one-time wealth tax with a straight face, how come people can propose a “one-time” corporate tax amnesty with a straight face? Yet that’s just what multinational corporations are pushing for; see this article by Peter Coy and Jesse Drucker or Drucker’s Fresh Air interview. The U.S. has a top average tax rate of 35 percent, but multinational corporations have gotten very good at shifting their income to overseas subsidiaries in places like Ireland and Bermuda that have much lower corporate tax rates, often avoiding U.S. corporate tax entirely. According to David Kocieniewski of the Times, for example, G.E.’s U.S. tax rate is 7.4 percent, and that’s including taxes it will not pay until it repatriates profits to the U.S. For 2010, it’s claiming a refund of $3.2 billion.
The “solution,” according to those same companies, is for the U.S. to offer a tax amnesty that will allow them to repatriate profits (which they have to do in order to, for example, pay dividends or buy back stock in the U.S.) at much lower tax rates — like zero. The lobbyists’ talking point is that if the companies have more cash in the U.S., they will invest it in ways that will create jobs. This doesn’t even pass the laugh test: as Coy and Drucker report, U.S. nonfinancial companies are already sitting on over $1 trillion in liquid assets within the U.S.
We’ve tried this before. In 2004, Congress passed a similar tax amnesty (companies were allowed to repatriate profits at a tax rate of 5.25 percent). Companies brought back lots of profits, the Treasury got a small bump in tax revenues, and companies learned that they should stash even more profits overseas and wait for the next amnesty. According to research by Thomas J. Brennan, the amount of profit stored overseas reached its 2004 peak as early as 2006 and has only grown since.

The last time this occurred, most of the money was spent on stock buybacks and dividends, not creating jobs.  Actually, the companies that brought back money cut jobs afterwards.  Lets not try it again.