Dean Baker schools Steve Forbes and Larry Kudlow on what another Tax Repatriation holiday would mean for our struggling economy. Kudlow usually just screams that tax breaks are the true job creators in the world, but with a seasoned pro like Baker on the set, he could only muster up a wimpy I've got no crystal ball defense. He's for Tax Repatriation to be made permanent of course, but not because it creates jobs or helps the economy. Kudlow just goes cuckoo for corporate cash.
Kudlow: I can't predict investment and job creation, but....
Larry says this quite a lot to Dean. His only defense for this scam is that it puts more money in the pockets of those nice and quite generous investors who aren't sitting on the sidelines even now. See?
Baker: The question is what's the best way to spend money and that's probably not a good way to do it. if we want to stimulate the economy there's lots of other things we can do and that's not a very good way and what that's going to mean is we'll have larger deficits in the future because everyone is going to park their money overseas with the expectation that there's going to be another tax holiday come 2016 or whatever it might be. So this is going to be costing us a lot of money in the long term with very little impact in the way of boosting growth or investment.
We need to stimulate the economy and this is a bad, bad way to stimulate the economy. It'll give almost no boost and I probably couldn't think of a worst way in fact
Steve Forbes finally chimes in and says we have the highest tax rates in the entire developed world dammit and everyone is growing faster than us and pulling away and we need to get the investors animal spirits back up. Baker brings up the '90s that had higher tax rates and higher economic growth. Steve Forbes comes back on and in a fit of desperation practically pleads with Baker: can't we be more like China? Dean starts laughing at him at this point. I did too.
Baker: China does a lot of things differently from us. You want to adopt China's model here? I thought this was the center of free market capitalism?
Kudlow comes back in to try and bail Forbes out by throwing around stats about China's tax rates and corporate rates in the Clinton years, but Dean cuts in and says that the tax rates were still higher back then. Forbes starts babbling about a one shot deal or something. You can try to figure him out.
Sadly, I hear Democrats also signing on to this idiotic idea under the apparent assumption that more money for rich people and corporations can be defined as "tax reform" (that justifies slashing the safety net) and will result in something they can call a stimulus. Baker explains why that's ridiculous, but Forbes just screeches the psychobabble talking points about the poor CEOs' fragile emotional state --- which the Right's been parroting for so long that most of the country believes they were handed down on Mt Sinai --- and that's that. Still -- it was good to see someone with sense on TV pointing out that all this crapola won't create jobs. More like this please.
Yes, more like that. Heather did a good post about the Tax Repatriation holiday a few days ago when Matt Taibbi joined Keith Olbermann to discuss it. Matt Taibbi: Corporate Tax Holiday Gaining Bipartisan Support
Here’s how it works: the tax laws say that companies can avoid paying taxes as long as they keep their profits overseas. Whenever that money comes back to the U.S., the companies have to pay taxes on it.
Think of it as a gigantic global IRA. Companies that put their profits in the offshore IRA can leave them there indefinitely with no tax consequence. Then, when they cash out, they pay the tax.
Only there’s a catch. In 2004, the corporate lobby got together and major employers like Cisco and Apple and GE begged congress to give them a “one-time” tax holiday, arguing that they would use the savings to create jobs. Congress, shamefully, relented, and a tax holiday was declared. Now companies paid about 5 percent in taxes, instead of 35-40 percent.
Money streamed back into America. But the companies did not use the savings to create jobs. Instead, they mostly just turned it into executive bonuses and ate the extra cash. Some of those companies promising waves of new hires have already committed to massive layoffs.. It was bad enough when lobbyists managed to pull this trick off once, in 2004. But in one of the worst-kept secrets in Washington, companies immediately started to systematically “offshore” their profits right after the 2004 holiday with the expectation that somewhere down the road, and probably sooner rather than later, they would get another holiday...read on