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Forum Post: Anyone heard about the recent proposal to give Corporations a tax holiday?

Posted 12 years ago on Oct. 4, 2011, 6:49 p.m. EST by StriveToBeInformed (2) from Elmont, NY
This content is user submitted and not an official statement

Here's an article from CNBC that covers the story (somewhat); It's super short: http://www.cnbc.com/id/44773176

Basically corporations usually have to deal with a 35% tax when they bring their profits back into the U.S. If this measure were to pass they'd only have to pay a 5% tax. This is being proposed under the guise that by allowing these companies to keep more money, they can then use that money to invest in job creations. Now, let's think back to 2004 when the same argument was made and a tax holiday was actually given to corporations. What did they end up doing with the money? To everyone here it really shoudln't be much of a surprise. They used it selfishly, to buy back their own shares and keep the profits to themselves. Did they make plans to stimulate the economy by creating more jobs and hiring more people? Of course not. I'll point out that people are saying Congress should take the opportunity to handle this situation really intelligently and give these Corporations this tax break, but with the requirement that they use the 30% they are now allowed to keep to reinvest in the U.S. economy through job creation etc in ways which would help the public at large. Sounds like a bit of a nice play right? And let's be honest, who doesn't want more employment opportunities? (Don't worry I know I'm circumventing some of the key issues of the OWS movement here since i'm talking about more people working for the corporate sector, but it's more to try to make a point about the possible effects of a tax holiday) Now, some of you should already know that just because something is "required" by law, doesn't mean it happens so of course the corporations almost completely disregarded any of the requirements of the tax holiday and pocketed the money for the most part. If you want more detailed and (reliable I'd say) sources on what exactly happened, check out this link, especially the paragraph that starts with the bolded sentence "Requirement to reinvest": http://www.cbpp.org/cms/index.cfm?fa=view&id=1010

Sorry, I went on a bit of a longer shpeel than i anticipated, but all in all what i'm trying to say is this new Tax Holiday has been gaining momentum in Congress recently and it BETTER NOT get passed. I'd consider it a huge slap in the face at the OWS movement as a whole and (I feel a bit cliche using this term since it's been repeated numerous times these past few weeks) to the 99% who are already getting screwed over and over.

Just thought I'd put an immediate issue on the forefront that we can stop in it's tracks if we try.

And I wanted to know what you all thought about the issue.



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[-] 1 points by Peter1 (55) 12 years ago

Our corporate tax rate is way too high. In fact, we have the second-highest corporate tax rate in the industrialized world. To get our economy going again, we need to cut our corporate tax rate in half.

Also, the "tax holiday" is a good idea. It only applies to repatriated profits -- money that would never be taxed otherwise. So it's not a choice between a 5% tax and a 35% tax, it's a choice between a 5% tax and a 0% tax.

[-] 1 points by StriveToBeInformed (2) from Elmont, NY 12 years ago

"a choice between a 5% tax and 0% tax" Hmm, I dunno about that. The 35% tax applies to profits made oversees which are then brought back for use by the parent companies within the U.S. And the tax holiday being a good thing would only be true IF those corporations used that money to invest safely in ways which would stimulate the economy at home, but considering that didn't happen in 2004 (and i'm a bit of a believer on learning from history), why would you think that it would be used to get our economy going now?

[-] 1 points by Peter1 (55) 12 years ago

The point is that the money won't be returned home if the tax rate on overseas profits remain at 35%, which is why keeping the tax rate on those profits at 35% won't raise any revenue -- or at least it won't raise much. Corporations don't have to bring that money home if they don't want to. They can choose to spend it abroad, which is what they're doing.

If you were a believer in learning from the past, you'd be a conservative.

[-] 1 points by StriveToBeInformed (2) from Elmont, NY 12 years ago

I get what you're saying about corporations investing more on foreign revenue instead of investing domestically because of such a high tax rate, but the point of my post is somewhat removed from that in the sense that a tax relief such as the one being proposed wouldn't lead to a shift toward a higher domestic revenue. You're completely right that corporations are choosing to spend abroad instead of here because of the tax rate and i'm not arguing against that. What I'm saying is the tax holiday wouldn't benefit the domestic economy because the repatriated money would simply be used by corporations to buy back shares and increase payouts to shareholders; in other words only the corporations would benefit, and that benefit would be short term in many respects, from such a tax relief, without stimulating the economy. To address the issue of money not coming home, a different measure would have to be proposed, one which will probably include the lowering of the tax rate I'll admit, to increase competition and stimulate the economy etc, but what i'm trying to point out is that the recently proposed tax holiday will do nothing to address that.

The way I see it, the only thing it will do is offer a nice tax relief to big corporations, which in light of the grievances currently expressed by Americans at large and in light of the OWS movement passing a proposal like that would be really..for lack of better words..shitty. I'm all ears if you think that the Tax Holiday will actually have a different result than it did in 2004 and somehow benefit the economy though.

Also "If you were a believer in learning from the past, you'd be a conservative" Because...I would want to conserve past traditions that brought on all the mistakes of the present? That's not really even sarcasm, I just don't get what you mean by that haha. But, i'm not trying to turn this into one of those senseless youtube-like comment wars so you don't actually have to explain that statement :P

[-] 1 points by Peter1 (55) 12 years ago

That was a surprisingly reasonable post. Though I disagree with parts of it, I'll leave it at that.