NYT editorial: Fool Me Twice?

In 2004, America’s multinational corporations offered Congress a deal: They would repatriate hundreds of billions of dollars in foreign profits — to invest in new plants and create new jobs at home — in exchange for a break from the 35 percent corporate tax rate imposed on overseas profits when they are brought into the country.

A Republican-controlled Congress leapt at it, passing the Homeland Investment Act, which allowed companies to repatriate some $300 billion in 2005 and pay only 5.25 percent in taxes. As for all of those promised factories and jobs, they did not materialize. Research by three prominent economists, including Kristin Forbes, a former top economic adviser to President George W. Bush, found that between 60 and 92 cents of every dollar brought home found its way into shareholders’ pockets.

The law required that companies use the repatriated money for productive purposes like research and hiring. That did not matter. Money being fungible, firms could easily claim they were not using “those” dollars on stock buybacks and executive pay.

American multinationals are at it again. In an op-ed article in The Wall Street Journal, the chief executive of Cisco, John Chambers, and the president of Oracle, Safra Catz, estimated that American companies have about $1 trillion in profits stashed abroad that they could repatriate for the greater good of the American economy if taxes on that money were lowered to about 5 percent.

(More here.)