On Sunday CBS’ 60 Minutes ran an expose on new corporate tax havens. Leslie Stahl, reporting the story, interviewed Cisco Systems CEO John Chambers who stated that companies located offshore to avoid the thirty-five percent U.S. corporate tax rate wanted to repatriate their earnings at a lower rate. Chambers stated that the money was “trapped,” a term that Stahl echoed. Never mentioned in the story was that Chambers is leading a coalition of corporations and trade groups, including the powerful U.S. Chamber of Commerce, to lobby Congress and the Obama administration for a tax repatriation holiday.
The WIN America Coalition is a collection of seventeen corporations and four trade groups advocating for a one-time tax repatriation holiday. The coalition consists of some of the biggest corporate backers of the Obama Administration including Duke Energy, Google, Microsoft, and Pfizer.
The seventeen corporations spent over $50 million on lobbying in 2010 and employed some of the best tax lobbying firms in Washington. Cisco’s lobbying operation is heavily focused on taxes, with the firm Ernst & Young, which employs numerous former staffers of congressional tax writing committees, leading the way.
One of Ernst & Young’s lobbyists is Nick Giordano, former chief tax counsel to the Senate Finance Committee and legislative director for Finance Committee Chairman Max Baucus. He is one of forty-three former staffers of congressional tax writing committees that were hired by the WIN America companies in 2010.
According to data obtained from the Center for Responsive Politics, seventy-eight percent of the WIN America corporation lobbyists have previous government experience.
Twenty-six of those lobbyists previously worked on the Senate Finance Committee or for members of the committee; sixteen worked on the House Ways & Means Committee or for committee members; five worked at the Treasury Department; and one worked for the Joint Committee on Taxation.
The coalition also employed two former members of Congress as lobbyists in 2010. Former Sen. Tim Hutchinson and former Rep. Bob Livingston were both employed by Oracle America.
While the Obama administration has remained cool to the idea outside of a total overhaul of the corporate tax system, it may take notice as many of the WIN America companies are likely to be financial supporters of the president's reelection campaign.
Recently, President Obama reached out to the Silicon Valley community in a private sit-down with tech executives and the venture capitalists funding new projects. Those companies included WIN America members Apple, Cisco Systems, Google, and Oracle. These four combined to donate $1.3 million to the 2008 Obama campaign. Duke Energy, another WIN America member, is providing a $10 million line of credit to fund the Democratic National Convention in Charlotte, North Carolina next year.
The companies involved in the coalition are part of a growing trend of companies shifting profits and earnings overseas to avoid paying taxes at the thirty-five percent rate. Google’s tax rate is around two percent; Pfizer’s has dropped to well below the thirty-five percent rate; Oracle’s tax rate is remarkably low, as it has shifted profits offshore.
The firms involved in the WIN America Coalition frame their case for a one-time tax holiday in one way, as Oracle President Safra Catz said, “it will create jobs.”
According to a Congressional Research Service report, the already existing evidence does not support this conclusion. In 2004 the government enacted a tax repatriation holiday as part of a short-term stimulus bill, the American Jobs Creation Act. The CRS Report shows that the holiday increased repatriation of earnings at a lower tax rate, but did not create jobs. In fact, the companies taking most advantage of the holiday cut jobs in the United States after repatriating earnings rather than created jobs.
The report also shows that the majority of the repatriated earnings came from the pharmaceutical and computer/electronic industries. These industries are currently the biggest supporters of the WIN America Coalition.