Fox's Payne Is Wrong: Tax Holiday For Foreign Profits Will Cost Jobs

Fox Business contributor Charles Payne argued that if Congress were to give corporations a tax break to bring back profits earned overseas, it would result in job creation, “and cost nobody watching this show a nickel.” In fact, when that policy was enacted in 2004, it resulted in job cuts and “a windfall for shareholders.”

Payne Will “Bet You” That A Tax Holiday Will Create Jobs

Payne: “I Bet You 3, 4, Maybe Even 500 Billion Dollars Will Go Directly Into Job Creation.” From Fox News' America's Newsroom:

MARTHA MacCALLUM (co-host): Let's take a look from last night. Michele Bachmann was asked how she would go about stimulating the economy, getting jobs going once again. Here's what she said last night.

[begin video clip]

MARIA BARTIROMO (co-moderator): How can you create jobs as quickly as possible?

BACHMANN: Well, I think one thing that we know is that taxes lead to jobs leaving the country. All you need to know is that we have the second highest corporate tax rate in the world.

[end video clip]

MacCALLUM: Is she right?

PAYNE: She's absolutely right. You know, you could argue Japan, but listen, realistically, you know, Cuba has a lower business tax rate than we do. Not only our corporate tax rate but the notion of allowing corporations, U.S. corporations to bring money back home. I think if we offered them some sort of window of opportunity to bring that money home, we could bring in maybe a trillion dollars

And yes, a lot of will go to buying back stock and dividends, but I bet you 3, 4, maybe even 500 billion dollars will go directly into job creation. And that would be absolutely phenomenal and cost nobody watching this show a nickel. [Fox News, America's Newsroom, 11/10/11]

Click here to see more of Fox News hyping this tax holiday

In Fact, Foreign-Profit Tax Holiday Was Enacted In 2004 -- And Companies Cut Payrolls

IPS: 58 Corporations Benefitting From 2004 Tax Holiday Cut Nearly 600,000 Jobs. Economic researchers at the Institute for Policy Studies studied the effects of the 2004 tax holiday and found:

Following a tax holiday on repatriated foreign earnings in 2004, 58 corporations that benefitted from the holiday slashed a total of nearly 600,000 jobs. These 58 giant corporations accounted for nearly 70 percent of the total repatriated funds and collectively saved an estimated $64 billion from what they otherwise would have owed in taxes. [Institute for Policy Studies, 10/3/11]

CBPP: “Many Of The Largest Beneficiaries Of The Tax Holiday Cut Jobs.” The Center on Budget and Policy Priorities also noted that “many of the largest beneficiaries of the tax holiday cut jobs in 2006 despite overall economy-wide job growth -- and used the repatriated funds instead to repurchase stock and pay dividends.” [Center on Budget and Policy Priorities, 6/23/11]

Where Did The Money Go In 2004? Nearly All Went To Payouts To Shareholders

Tax Policy Center's Gleckman: “Most Of The Repatriated Dollars Went To Shareholders.” From Howard Gleckman, editor of the Tax Policy Center's blog TaxVox, writingon

There is no evidence that a similar break created any new jobs when Congress tried it in 2004. Instead, most of the repatriated dollars went to shareholders in the form of dividends or stock buybacks (which raise equity prices). [, 10/13/11]

CBPP: “Most Of The Repatriated Profits Were Paid Out As Windfalls To Shareholders.” From CBPP:

A study by professors at the Wharton School of Business and the University of Oregon concluded that even though the 2004 law specifically prohibited the use of repatriated earnings for share repurchases, firms used a significant share of repatriated earnings for exactly that purpose. [9] They found that, “in spite of having plans to invest in approved activities, repatriating firms significantly increase[d] payments to shareholders, and that the amount of this increase is related to the amount of repatriation.” Similarly, the NBER study found that a dollar increase in repatriations “was associated with an increase of almost $1 in payouts to shareholders.” That is, most of the repatriated profits were paid out as windfalls to shareholders. [Center on Budget and Policy Priorities, 6/23/11]

NBER: Nearly Every Dollar Of Repatriations Went To Shareholders. From “Watch What I do, Not What I Say: The Unintended Consequences Of The Homeland Investment Act” by Dhammika Dharmapala, C. Fritz Foley, and Kristin J. Forbes:

Repatriations did not lead to an increase in domestic investment, employment or R&D -- even for the firms that lobbied for the tax holiday stating these intentions and for firms that appeared to be financially constrained. Instead, a $1 increase in repatriations was associated with an increase of almost $1 in payouts to shareholders. [, June 2009]

In Fact, If Companies Expect A Regular Holiday, “They'll Stash Even More Profits Overseas”

Gleckman: Firms Are “Sitting On” Over $2 Trillion In Cash, So “It's Is Hard To See How Letting Them Move Around Another $1 Trillion” Will Help Jobs. From

Will the holiday create jobs, as advertised? It didn't work in 2004 and may be even less successful today. Firms are already sitting on more than $2 trillion in cash, more than enough to hire or invest. In the absence of growing demand for their goods and services, it is hard to see how letting them move around another $1 trillion is going to boost jobs. [, 10/13/11]

Gleckman: If Firms Expect Holiday, They'll “Stash Even More Profits Overseas,” Which Makes “Less Money Available For Domestic Hiring And Investment.” From

Worse, if firms come to expect a regular holiday, they'll stash even more profits overseas while they await the next windfall. That will make less money available for domestic hiring and investment.

At the same time, some successful firms that would have hired anyway will just enjoy the windfall. [, 10/13/11]

CBPP: Another Tax Holiday “Would Send A Powerful Message To Corporations To Shift Investment And Jobs Overseas.” From the Center on Budget and Policy Priorities:

And unlike the 2004 repatriation holiday, which was sold as a “one-time-only” event, a second holiday would send a powerful message to corporations to shift investment and jobs overseas and hold the profits there -- until yet another tax holiday is declared. Indeed, enactment of another such tax holiday would further embed the shifting of investment, jobs, and profits overseas as a major tax avoidance strategy for many U.S. multinational corporations. [Center on Budget and Policy Priorities, 6/23/11]