Thursday, December 1, 2016

Tax Breaks to Corporations who return their stockpiled profits to US


We tried such repatriation of profits before (2004)—How well did it work?  Here is a Wall Street Journal reporter’s view in 2011.



Report: Repatriation Tax Holiday a 'Failed' Policy


Kristina Peterson

Oct. 10, 2011 9:41 p.m. ET

WASHINGTON -- The 15 companies that benefited the most from a 2004 tax break for the return of their overseas profits cut more than 20,000 net jobs and decreased the pace of their research spending, according to report from the Democratic staff of the Senate Permanent Subcommittee on Investigations released Monday night.

The report warned against repeating the tax break, calling the 2004 effort "a failed tax policy" that cost the U.S. Treasury $3.3 billion in estimated lost revenues over 10 years and led to U.S. companies directing more funds offshore. U.S.-based multinationals often defer bringing back profits earned abroad to avoid paying U.S. taxes on them.

The 15 companies that repatriated the most after the 2004 tax break on the return of overseas profits later cut a net 20,931 jobs between 2004 and 2007 and slightly decreased the pace of their spending on research and development, found the report surveying 19 companies' activity.

When Congress passed the repatriation tax holiday in 2004, the legislation specified that the funds should be earmarked for activities like hiring workers or conducting research and prohibited using the money for executive compensation or buying back stock. Companies that brought back profits earned abroad saw them taxed at roughly 5%, instead of the top 35% corporate tax rate.

"There is no evidence that the previous repatriation tax giveaway put Americans to work, and substantial evidence that it instead grew executive paychecks, propped up stock prices, and drew more money and jobs offshore," Sen. Carl Levin (D., Mich.), chairman of the subcommittee, said in a statement Monday night. "Those who want a new corporate tax break claim it will help rebuild our economy, but the facts are lined up against them."

The survey comes less than a week after Sens. John McCain (R., Ariz.) and Kay Hagan (D., N.C.) introduced a proposal for another repatriation tax holiday that would lower the tax rate on repatriated funds to 8.75%, with the opportunity to see that decrease to 5.25% if a company expanded its payroll. In the House, Rep. Kevin Brady (R., Texas) introduced a similar bill in May.

However, repeating the 2004 repatriation tax break has already come under criticism from skeptics, including the conservative think tank the Heritage Foundation, who have argued that companies aren't low on capital and the tax break won't nudge them into making any investments they wouldn't already make.

The five companies that benefitted the most from the 2004 tax break included Pfizer Inc., Merck & Co., Hewlett-Packard Co., Johnson & Johnson and International Business Machines Corp., repatriating $88 billion, or 28% of the total amount brought back to the U.S., according to the report. In total, 843 companies brought back $312 billion, the Internal Revenue Service has assessed.

The report noted that Pfizer had the single largest share of the repatriated profits, bringing home $35.5 billion in foreign earnings, while also cutting 11,748 U.S. jobs between 2004 and 2007. Similarly, IBM brought back $9.5 billion, but cut 12,830 jobs, the report stated, citing answers from the companies in response to its questions.

Meanwhile, the top 15 repatriating companies also accelerated their spending on stock buybacks and executive compensation after the tax break. The top five executives at those 15 companies saw their compensation rise 27% from 2004 to 2005 and then another 30% between 2005 to 2006.

The tax break gave a boost to a narrow slice of U.S. multinationals, with pharmaceutical and technology companies reaping more of the benefits and provided "no benefit to domestic firms that chose not to engage in offshore operations or investments," the report found.

Companies brought back funds held in areas that the Government Accountability Office has labeled tax havens, including Switzerland, the Bahamas, Bermuda, the Cayman Islands and Ireland. Of the 19 companies surveyed by the committee, seven repatriated between 90% and 100% of their funds from tax havens.

The 2004 repatriation tax holiday further motivated companies to keep even more of their earnings overseas, the report found. With the exception of Pfizer, the 10 companies that repatriated the most money after the 2004 tax break have stashed increasing funds offshore every year since the 2004 tax break, the survey noted.

For example, Coca-Cola Co. brought back "nearly all" of its qualified earnings from a unit in the Cayman Islands that had no Cayman employees and functioned to provide "legal insulation" for its U.S. assets, the company answered in the survey.

The "negative effects" of the tax break "create unfair tax advantages for a narrow sector of corporations with damaging economic impacts on the U.S. economy as a whole," the report concluded.

Supporters of another repatriation tax holiday Monday night said the report was one-sided and didn't reflect the stimulating effect an influx of funds could have on the struggling U.S. economy.

"Unfortunately, Senator Levin believes that Europe and Asia can do better things with the money than America," said Win America, a coalition backing the tax break, in a statement. "The real question is, should we allow American companies the freedom to deploy this money here or risk it being spent overseas?"

Mr. Levin and Sen. Kent Conrad (D., N.D.), chairman of the Senate Budget Committee also sent a letter to the Joint Select Committee on Deficit Reduction urging the 12-lawmaker panel not to support a repatriation tax break in its proposal to reduce the federal budget deficit.


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Rauner-Exelon deal clears way for nuke bailout

November 30, 2016

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By Steve Daniels


Photo by Thinkstock

Gov. Bruce Rauner and Exelon have agreed to an eleventh-hour deal that paves the way for a ratepayer-financed bailout that will keep two at-risk nuclear plants open.

The two sides negotiated last night and this morning and produced a framework that the governor can support. In a release, Exelon said it had agreed to changes in the wide-ranging legislation that limit the rate hikes for the average Commonwealth Edison household customer to 25 cents per month and a 1.3 percent increase for businesses based on their 2015 rates.

A number of business groups, including the Illinois Manufacturers Association, remain opposed, and there are questions about how strong those "rate caps" are.

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In addition, money for new “microgrids” requested by Exelon-owned Commonwealth Edison will be struck from the bill, sources said. ComEd originally wanted $250 million in ratepayer money to build five independently functioning mini-power grids for sensitive installations throughout northern Illinois. In negotiations, that was pared to just one, for the Bronzeville neighborhood on Chicago's South Side. Now that is gone, too, sources say.

Exelon's Clinton nuclear power plant. The utility had set a deadline of early December to reach agreement on a bailout bill, or it would be forced to close the downstate facility.

Exelon's Clinton nuclear power plant. The utility had set a deadline of early December to reach agreement on a bailout bill, or it would be forced to close the downstate facility.

Money for new solar development in Illinois will be pared as well.

The measure still will greatly expand financing and goals for construction of new wind and solar projects in Illinois, as well as utility-run programs to reduce energy consumption. And ComEd for the first time will be allowed to earn a return on the money it spends on energy-efficiency programs.

Rauner also won concessions on behalf of the state's largest industrial power users, exempting them from rate hikes to finance the energy-efficiency expansion.


The governor's resistance to the bill was seen as the last impediment to a deal that would keep two of Exelon's six nuclear plants in the state from closing prematurely. Exelon had set a deadline of early December to reach agreement on a bailout bill or it would be forced to close its Clinton plant downstate.

The company has agreed to keep the plants open for at least a decade under the legislation.

"While there is still a lot of work to be done, we are pleased to have an understanding with the governor's office and continue to work with the four (legislative) leaders and their professional staffs, as well as other stakeholders and the bill's more than 200 other supporters, to move this bill forward," Exelon said in a statement. "With today's progress, we are all one step closer to saving thousands of jobs in Illinois."

The agreement now appears to clear the way for quick passage. But, with budget negotiations between Rauner and House Speaker Michael Madigan still at a stalemate, lawmakers will have to vote for what in the end will be an electricity rate hike for all Illinoisans when there isn't yet a budget, the state is billions behind on bills it owes and a future tax hike is likely.

A Rauner spokesman didn't respond immediately to a request to comment.

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Burritt Township farmer helps rally community against Great Lakes Basin railroad


By Susan Vela
Staff writer

BURRITT TOWNSHIP — Farmer Lana Daly couldn’t sit, wait and watch for the Great Lakes Basin Transportation Inc. railroad to come through her property.

She became an activist soon after she learned train tracks might impose upon her family’s centennial farm of about 280 acres.

Daly, 56, helped organize an Oct. 18 informational meeting that drew hundreds of concerned residents to Winnebago High School.

They were upset with Great Lakes. It had announced that a section of its proposed railroad through Indiana, Illinois and Wisconsin would switch to Winnebago County from Boone County.

Daly urged them to stay informed and, if they opposed the plan, to write protest letters to the U.S. Surface Transportation Board, which must approve the project.

Her activism remains energetic. By day, she is an Auburn High School reading teacher with Rockford Public Schools. After hours, she connects with her fellow protesters, studies Great Lakes and tries to be as knowledgeable as she can to stop the railroad.

The activist has helped build a database of about 1,800 people who want to stay connected with the railroad protesters.

Whenever she can, she tells people the fight isn’t over even though the Winnebago County Board passed an ordinance opposing the railroad.

“It’s really heartwarming,” she said. “There are people in Boone County who are like, ‘No, we are going to help you fight this.’

“I’ve never been involved in this kind of a grassroots effort. I'm still responding emotionally. I guess the prospect of losing four generations of hard, honest work, regardless of how it's discussed, is disturbing. Multiply that by hundreds of farmers and it's purely disgusting."

She urges observers to like Facebook accounts created by Rock Against the Rail, which states “A Letter A Day Keeps Great Lakes Basin Away.” Daly wants followers to also like Facebook accounts created by BLOCK GLB Railroad and Winnebago County Against GLB Railroad.

“You have to be patient. There are so many people involved," Daly said. "We’ve got everybody engaged and ready to go forward. We have the ability to contact people and keep them informed."

Susan Vela: 815-987-1392;; @susanvela

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Boone County dog lovers celebrate opening of new Animal Services building




By Susan Vela
Staff writer

BELVIDERE — Stray, injured, abused or abandoned animals will find cushier quarters Monday when Boone County’s $1 million Animal Services building officially opens.

The 3,200-square-foot facility near the intersection of Squaw Prairie Road and McKinley Avenue has been years in the making.

More than 50 community members, along with some of their furry friends, stood outside the new facility today for a ribbon-cutting ceremony.

Voters approved a November 2014 referendum to raise about $800,000 through a property tax to help pay for construction. A $5 add-on fee for dog tags is helping pay for the difference.

“I look around and see so many people contributed and put forth the effort here,” Boone County Board Chairman Bob Walberg said. “We just want to thank everybody for the support and the effort. Obviously, it certainly turned out nice. This is a wonderful new building.”

The kennels have barriers to prevent canine rowdiness. The building has a consultation room, a receiving area for animals, an activity room and other amenities.

“It will be easier on me now that I don’t have to fix everything,” said Justin Unger, animal services officer. “It’ll be a much cozier home for the dogs.”

Boone County officials had hoped for an August opening. Unger said some electrical issues caused delays.

But now the community can say goodbye to the Appleton Road facility that has less than 1,500 square feet and is more than 60 years old. The county purchased the veterinary clinic in 2003.

Dogs were spending some nights among piles and pools of their own waste on cold, snowy nights when outdoor stall gates had to be closed. Indoor stalls didn’t have drainage systems.

“It needed to be torn down 20 years ago,” Belvidere resident Al Johnson said.

He donated some fencing for the Animal Services property.

“I’d just like to give back to the community,” he said.

Susan Vela: 815-987-1392;; @susanvela

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