Re: [OPE-L] debate on labor aristocracy

Date: Mon Mar 26 2007 - 11:41:43 EDT

-------------------------- Original Message ----------------------------
Subject: First point. Re: FW: [OPE-L] debate on labor aristocracy
From:    "Steve Palmer" <>
Date:    Mon, March 26, 2007 11:20 am

On Jurriann's point about tax havens ...

First, the bourgeoisie moved to fix the problem of the money parked in the
tax havens - there was a tax break to let these companies bring the money
home free.
Second, it was supposed to be used to create jobs, presumably thanks to
the efforts of the Democrats, political voice for the labour aristocracy.
Not simply fill corporate coffers - 'You want your money - then pay off
our supporters as well'. A little crude, but you get the idea. This is
part of the deal-making going on behind the scenes.
Third, look how Dell is using its money - benefits *for non-executives*.

It's easy to make this complicated, but when you look at the
micro-economics,  as it were, there are myriads of ways in which the loot
drips down, visibly.


Break on Foreign-Profit Tax Means Billions to U.S. Firms

By Jonathan Weisman
Washington Post Staff Writer
Friday, August 19, 2005; D01

Prompted by a one-time tax holiday on profits earned abroad, pharmaceutical
giant Eli Lilly and Co. announced early this year that it would bring home
$8 billion to boost research and development spending, capital investments
and other job-creating ventures.

Six months into the year, Lilly's R&D spending had increased by 10
percent. But that $134 million is only a small fraction of the $8 billion
that is boosting the company's coffers.

For proponents of the tax holiday, including the corporations that lobbied
for it, Lilly proves that the tax provision is working. For skeptics, it
means the opposite: A measure designed to create jobs is instead rewarding
the companies that are most adept at stashing overseas profits in tax
havens, allowing them to bring money home at a severely discounted tax
rate. Once here, that money is simply freeing up domestic profits that
would have been spent on job creation and investment anyway.

"There will be some stimulative effect because it pumps money into the
economy," said Phillip L. Swagel, a former chief of staff on President
Bush's Council of Economic Advisers, which had opposed the tax holiday.
"But you might as well have taken a helicopter over 90210
[Beverly Hills] and pushed the money out the door. That would have
stimulated the economy as well."

A well-organized business coalition, led by pharmaceutical firms and
high-technology companies, pushed hard last year to get a long-sought tax
holiday into the corporate tax bill moving through Congress, called the
American Jobs Creation Act. Treasury Secretary John W. Snow objected that
the measure would unfairly benefit multinational corporations over
domestic firms, while White House economists said it would produce no
substantial economic benefit.

But with bipartisan backing, the business groups prevailed. Most companies
with substantial cash holdings overseas have until the end of this year to
bring them home at an effective tax rate of 5.25 percent, rather than the
standard corporate tax rate of 35 percent.

So far, the effects have been muted. Martin Gonzalez, a principal at Banc
of America Securities, estimated that by midyear, $30 billion to $40
billion in foreign profits had been brought home, just 10 percent of the
$300 billion to $400 billion he said could be repatriated by the end of
the tax holiday.

Pfizer Inc. has led the pack with a promised $37 billion repatriation.
Procter & Gamble Co. intends to bring home $10.7 billion, and Johnson &
Johnson Inc. has an $11 billion plan. Schering-Plough Corp. could bring
back $9 billion. This week, Hewlett-Packard Co. announced it will
repatriate $14.5 billion in the second half of the year, mainly for
"strategic acquisitions," said Ryan Donovan, an HP spokesman.

Robert S. McIntyre, a critic of corporate tax policy at Citizens for Tax
Justice, questioned why "strategic acquisitions" would create jobs.
"Usually it means layoffs. That's the strategic part," he said.

Of the roughly 100 companies that disclosed permanently reinvested foreign
earnings over $500 million in 2002, 20 percent announced repatriation
plans in the first three months of the year, said Susan M. Albring of the
University of South Florida and Lillian F. Mills of the University of
Arizona, who are tracking the response. Fifteen percent said such plans
were likely.

Under the law and subsequent Treasury regulations, the repatriated money is
supposed to go toward hiring and training, infrastructure development, R&D,
capital investments, or other job-creating activities. None of the money
could be used to feather the nests of shareholders or bosses through
executive compensation, stock buybacks or dividend increases.

But Treasury officials warned from the beginning that such requirements were
virtually unenforceable, Swagel said.

For proponents of the policy, there may be no better example than Dell Inc.,
the personal-computer maker, which said it will bring home $4.1 billion in
foreign profits, in part to build a new manufacturing plant in
Winston-Salem, N.C.

But of that $4.1 billion, just over $100 million is going to the plant,
which Dell says would have been built anyway. Dell spokesman Jess
Blackburn said other expenditures will include compensation and benefits
for non-executives, research and development, advertising, marketing, and
some capital investments outside North Carolina.

What it will not be used for is a $2 billion stock buyback announced April
6, two months after the repatriation plan was announced, Blackburn said.
That buyback, although double the level initially planned for the firm's
second quarter, was merely the latest in a long series of buybacks used to
boost Dell stock prices, he said.

"If we had never bought stock back and we bought stock back this year, I
would raise my own eyebrows," he said.

In June, after the release of its repatriation plan, Pfizer said it would
buy back up to $5 billion in common stock.

No one is suggesting that companies are violating the law, said Pamela F.
Olson, who as assistant Treasury secretary for tax policy opposed the
provision. But the new cash from abroad has "loosened company balance
sheets," she said. Some of the new investments would not have been made
without the measure, but most of it is simply displacing money that would
have been spent anyway.

"Money is in some sense always fungible," said Jonah Rockoff, a Columbia
University economist.

Another concern is the incentive the holiday may provide to tax shelterers.

Companies with operations in countries with corporate tax rates close to the
U.S. rate had nothing to gain, since they already can deduct taxes paid
abroad from tax bills on repatriated earnings. Companies with profits in
tax havens with little or no corporate income taxes stand to gain the

It made sense that the provision was pushed by technology and pharmaceutical
companies, because so much of their profits come from "intangible" property,
such as patents and licensing, Mills said. "The profit from a new drug for
pain relief is easier to shelter in a low-tax country than is the profit
from making and selling shirts," she said.

But such companies also have large R&D operations in the United States that
could be funded by repatriated profits.

"Companies are making the decision," Mills said. "'Would I ever have
repatriated these earnings?' If the answer is yes, they're taking it. If
it's no, they will not even want to pay a 5.25 percent rate."
"I study a lot. That is one of the responsibilities of every
revolutionary." Hugo Chavez.

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