Gannett News Service
July 9, 2010 Friday
Failed Boxer amendment could have helped H-P
By PETER URBAN
WASHINGTON - Republican challenger and former Hewlett-Packard CEO Carly Fiorina says Sen. Barbara Boxer has little to show for her 18 years in office, but at least one legislative victory paid off for HP.
The company was able to bring $14.5 billion in offshore earnings back home without owing Uncle Sam as much as 35 percent in corporate taxes, thanks to a 2004 law championed by Boxer and Sen. John Ensign, R-Nev.
Boxer and Sen. Dianne Feinstein, D-Calif., voted for the proposal to offer a one-year tax amnesty to U.S. multinationals that repatriate their offshore earnings.
At the time, Boxer and Feinstein argued that U.S. multinational companies "have significant earnings from overseas that could be used to invest in the economic recovery, but the current tax structure gives them more incentive to leave those earnings overseas."
The proposal had been heavily lobbied by pharmaceutical and high-tech firms that stood to gain the most from the tax break, according to a 2003 report from the Center for Responsive Politics.
The Homeland Investment Coalition - representing 63 companies including Hewlett-Packard - lobbied for the tax break. Executives from those companies contributed $191,000 to members of the Senate Finance Committee and $154,000 to members of the House Ways and Means Committee, according to the nonprofit center, which tracks federal lobbying and campaign finances.Hewlett-Packard had about $14.5 billion in foreign earnings that qualified for the temporary deduction, according to company financial statements. Fiorina served as CEO of HP from July 1999 to February 2005.
In February 2009, Boxer made a similar plea for a temporary tax break as a way to help the economy. The new proposal would have cut the 35 percent top rate down to 5.25 percent for income repatriated in 2009 or 2010.
The measure was defeated 42-55 despite heavy lobbying from the high-tech industry and others with large cash holdings overseas. It was one of the 20 roll calls taken so far in the 111th Congress in which California's two senators sided with the Republican minority over their fellow Democrats.
The week before the Senate considered Boxer's amendment, Citizens for Tax Justice criticized what it described as a "lobbying blitz by multinational corporations" to promote a "scandalous lobbying proposal."
It noted that there was little evidence to suggest that the program produced any economic benefit to the nation, even as the U.S. companies had to pay only $8 billion in corporate taxes on $312 billion in repatriated earnings.
"Money is fungible," said Robert McIntyre, director of Citizens for Tax Justice. "You take it from one pot; you put it in another. Congress says you can't use repatriated profits for a prohibited purpose, but of course you can free up some other money and use that for the prohibited purpose."
A Congressional Research Service analysis published in January 2009 found that 10 of the top dozen companies that took advantage of the 2004 break cut jobs. Hewlett-Packard repatriated $14.5 billion and laid off 14,500. Pfizer repatriated $37 billion and cut 9,000 jobs in 2005.
California-based Oracle and Intel also repatriated foreign earnings. The money helped Oracle acquire two U.S. companies and helped Intel build a new factory.
The Business Roundtable, an organization of corporate chief executives that's supporting Fiorina's Senate campaign, lobbied in favor of Boxer's latest proposal. It commissioned economist Allen Sinai of Decision Economics to make a study promising that a repatriation tax holiday would have miraculous economic effects.
Sinai argued that amnesty did benefit the U.S. economy, according to a survey of several hundred of the businesses that took advantage of the program. The businesses reported that 25 percent of the money went to capital investments and 23 percent to hiring and training new workers.
Sinai said that a similar injection of offshore earnings into the U.S. economy would net about 614,000 new jobs and add $110 billion to the gross domestic product in 2010.
"A private-sector stimulus could be a win-win for government and U.S. businesses, without further straining an already overextended Federal Reserve balance sheet," he wrote.
Senate Democrats who opposed the Boxer measure said it would reward outsourcing of jobs.
"If we allow U.S. corporations to once again send the money they earn abroad back to the U.S. at a discounted tax rate, it will only lead to more companies moving their profits offshore," said Sen. Byron Dorgan, D-N.D.
Gannett News Service: Failed Boxer amendment could have helped H-P
Gannett News Service