BEYOND THE NUMBERS
The Trickle-Down Economics of Tax Cuts for Multinationals’ Foreign Profits
Oosterhuis: To my mind, it’s largely their shareholders.
Rep. McDermott: Oh so it’s the shareholders. Not the workers, not the economy of the country, it’s only the shareholders. We’re having a shareholder sweepstakes.
Oosterhuis: I think it’s largely the shareholders, yes, because a lot of that — there’s two effects. One would be if the money comes back, it would be used to buy back stock, pay dividends in the first instance that are not being paid now and I think that’s healthy, it gets the money in circulation and that will help the economy indirectly. The second aspect is that today, because of the trapped cash, companies have more of an incentive to buy assets outside the U.S. than to buy assets inside the U.S. It has to help with that bias.These arguments are pure trickle-down theory: only shareholders will receive a direct benefit; everyone else has to hope that the gains will trickle out into the wider economy. Multinationals made much bolder predictions in 2004 when they persuaded policymakers to adopt a temporary “tax holiday” on repatriated profits. At that time, companies promised that they’d use the cash to directly boost hiring and investment in the United States. Instead, they paid the bulk of it to their shareholders while cutting tens of thousands of jobs. But these new trickle-down arguments are just as unconvincing. In reality, cutting taxes on overseas profits — whether through another tax holiday or adoption of a territorial tax system — would make it more attractive for multinationals to shift profits and investments offshore. That would leave less capital in the United States, weakening the economy and reducing the wages of U.S. workers. The lesson here is that, when it comes to corporate tax reform, the interests of U.S. workers are not necessarily the same as those of U.S. multinational corporations. And workers’ interests deserve consideration, too.