Sunday, May 22, 2005

The American Job Destruction Act

The American Job Creation Act is a farce. Congress passed this bill with the promise that it would help keep American jobs in America. Unfortunately the only jobs it will help keep in this country are CEOs and other executives.

The American Job Creation Act will permit corporate American to bring back any portion of the $650 billion in profits earned overseas during the past decade, while avoiding most of the income tax liabilities they normally would have to pay.

To qualify for the tax cut companies must file a reinvestment plan showing that they intend to spend the profits they bring back on hiring workers, capital investments, research, acquisitions, advertising, or debt repayment. By doing this multinational companies have a one year window to return foreign profit to the US at a rate of 5.25% instead of the normal 35%.

The biggest flaw with this bill is it doesn't require companies to create any new jobs with the money they bring back. The idea is that if corporations have more money they will hire more employees. This is backward thinking. Given the choices they have on how to spend this money

I'm sure you'll see a number of companies using it for acquisitions or other things that either save the company money or make the company money. Money that is normally used for these things will go to their top executives and their best shareholders as part of the usual shell game. What incentive do they have to hire more people? On top of that, the fact that they are able a lower tax on that money means that American citizens will either have to pay more in taxes to make up the difference, or suffer cuts in government programs because there is not enough money to fund them. It seems to me that instead of helping American workers find and keep jobs, this bill does nothing to help American workers and instead may even hurt them.

If the congress wants to pass a bill that will truly help American workers they need to give companies incentives for hiring and retaining American workers. Tax breaks for bringing over money currently stored in foreign accounts may bring more money into this country, but doesn't do much to stimulate our economy. The real way to stimulate the economy is to have a large productive middle class. People who have jobs buy homes and cars, take vacations, and spend money on many other things. People who are unemployed or underemployed are going to spend their money only on essentials. When will congress ever figure that out?

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