Why do those Corporate Entities invest so much in Lobbying?
Answer: Sometimes it pays off -- Big Time!
How would you like a 22,000 % Return on Investment?
Nice Work if you can get it! Bahamas beaches here I come.
How These Companies Earned a 22,000% Return
by Dan Newman, The Motley Fool -- DailyFinance 12/27/11
[...]
The numbers
According to a University of Kansas report recently profiled on NPR's Planet Money, companies spent $282 million lobbying for the passage of the American Jobs Creation Act of 2004, which it concludes saved the companies a combined $88.6 billion in taxes. This bill allowed a one-time tax break on repatriated profits, which represented money that corporations held in overseas subsidiaries before transferring it back to U.S.-based business entities. Instead of the typical 35% corporate tax rate, companies only had to pay 5.25% on repatriated profits. The largest winners of the 2004 bill, according to the report:
Company Amount Repatriated (in Billions)
Pfizer $37
Merck (NYS: MRK) $15.9
Hewlett-Packard (NYS: HPQ) $14.5
Johnson & Johnson (NYS: JNJ) $10.8
IBM $9.5
Bristol-Myers Squibb (NYS: BMY) $9
Eli Lilly (NYS: LLY) $8
[Source: "Measuring Rates of Return for Lobbying Expenditures: An Empirical Analysis Under the American Jobs Creation Act," Alexander, Mazza, Scholz, 2009.]
[...]
The meaning
Even though the intention of the repatriation tax holiday was to boost domestic investments and create jobs, companies used the extra cash elsewhere. Studies on the bill's effects claim that for each repatriated dollar, share repurchasing increased $0.91.
That's a near a dollar-for-dollar re-investment opportunity for Corporations to increase their own Capital worth, for each "patriotic dollar" recaptured "back into the American economy", nearly tax-free.
Nice payday, if you can get it ...
Fact-based studies show "Repatriation Tax Holidays" DON'T live up to the Hype. And yet we're about to be 'hyped' again ... those Corporate Entities know a "good bet" when they see one.
Measuring Rates of Return for Lobbying Expenditures: An Empirical Analysis under the American Jobs Creation Act
April 8, 2009
Raquel Meyer Alexander, University of Kansas - School of Business
Stephen W. Mazza, University of Kansas - School of Law
Susan Scholz, University of Kansas - Accounting and Information Systems Area
[...] In this paper we use audited corporate tax disclosures relating to a tax holiday on repatriated earnings created by the American Jobs Creation Act of 2004 to examine the return on lobbying. We find firms lobbying for this provision have a return in excess of $220 for every $1 spent on lobbying, or 22,000%. Repatriating firms are more profitable overall, but surprisingly, profitability is not a predictor of repatriation amount. Rather, industry and firm size are most predictive of repatriation.
This also shows the power of language -- choose an Apple-pie word, and you can get most of America to jump on the Apple-pie band wagon. No questions asked.
Repatriation -- it spurs Businesses to Re-hire at home, right? OK, I'm in.
If only it actually happened that way in real life ... that re-hire part.
CRS reports on repatriation tax holiday impact
Angry Bear Blog, BusinessInsider.com -- Jan. 10, 2012
[...]
Our experience with the 2004 repatriation holiday was not impressive. Much of the repatriated funds were diverted to share buybacks and not used to increase investments or increase jobs. In fact, many companies that repatriated the most money engaged in heavy firings of workers. Hewlett Packard was notable, with large layoffs accompanying significant repatriated cash.
[...]
Those well-paid representatives of Corporate Entities will claim that a 5% limited-time Repatriation Tax Holiday will create jobs and spur reinvestment ... in America.
But the history, kind of tells a different story ...
Tax holiday from reality
by Cheryl Cook, theunion.com, Nevada City -- June 25, 2011
Money is power, so it just might happen again as it did in 2005 when President Bush and Congress appeased corporations with a tax holiday at a one-year 5.25 percent tax rate.
Companies with huge assets offshore were offered the opportunity to return $312 billion back to the United States at a much lower tax rate and stimulate the job market.
However, the majority of the money that returned into this country, a whopping 92 percent, was returned back to stockholders in the form of dividends and stock buybacks, according to the National Bureau of Economic Research.
Hiring and job creation remained flat.
Given the 'do-over first down' opportunity, Corporate Entities will always invest in themselves first, every time. It's the nature of the beast.
We've been there, done that before ... and they will take every "free pass" opportunity to make themselves stronger. That's the Corporate way.
The Very Last "Stimulus" Card For Obama To Play
by Joe Weisenthal, businessinsider.com -- Aug 2, 2011
[...] Repatriations did not lead to an increase in domestic investment, employment or R&D -- even for the firms that lobbied for the tax holiday stating these intentions and for firms that appeared to be financially constrained. Instead, a $1 increase in repatriations was associated with an increase of almost $1 in payouts to shareholders.
Studies also show it's just simple physics, cause and effect, free markets unfettered.
Profit motives breed more profit motives. And all the good-intentioned people can do most times, is to sit by and watch it happen. Such is the price of American representation, in this continuing era of Norquist-Reaganomics.
ARTICLE: Measuring Rates of Return on Lobbying Expenditures: Empirical Case Study of Tax Breaks for Multinational Corporations
The Journal of Law & Politics -- Fall, 2009
Authors: Raquel Alexander and Stephen W. Mazza and Susan Scholz
Lobbying is a multi-billion dollar industry, with more than $ 3 billion in lobbying activity taking place during 2008 alone.
According to some reports, from 2000 to 2005 the number of registered lobbyists representing private interests before the federal government doubled, and the average fee charged by lobbyists increased by 100 percent.
Presumably, private interest groups would not be willing to spend such huge sums on lobbying unless they believed that it resulted in a positive and meaningful return on their investment. The notion that lobbying does have a significant influence on legislative outcomes causes concern among many political observers, including journalists and members of the general public. Many lawmakers also lament what they see as the growing power and influence of private interest groups on government actors.
And once again it is the season for breaking out more more of those 'Apple-pie words' ... being an Election Year, and all.
Repatriation Tax Holiday. Get used to hearing about it, in flowery prose.
Because, it means a windfall to some entities, and even more denial of public services for citizens. For as long as Paying Taxes can continue to be de-linked from any results-oriented real American Patriotism ...
Then those Corporate Entities will keep raking it in while the rest of us just keep 'getting the left-over crumbs' ...
Studies show, and politicians say, that is simply the American way ... What's good for Business, is good for Business.
David Cay Johnston: A Corporate Tax Code For A Different Century
huffingtonpost -- 01-13-2012
NEW YORK, Jan 13 (David Cay Johnston, Reuters) - Big business is lobbying for a major cut in the corporate income tax rate, and both President Barack Obama and key congressional leaders are on their side. But the evidence that a rate cut will boost the economy is weak. What's needed is comprehensive reform that includes a simpler, fairer and more transparent corporate tax code. [...]
But what's needed -- and what we will get, are often two very different investment calculations, with it comes to Washington DC.
A town where re-investment schemes -- be they Patriotic or Not -- are often for sale to the highest bidders.
Studies show such schemes can pay very, very well for the well connected. Whether those Repatriation schemes deliver as promised or not ... Who count the poker chips anyways?
The 'casino bouncers' get better gigs, simply by looking the other way. Sometimes, it pays very well to be clueless too.
"Greed is good", right? ... Isn't that another one of those Apple-pie ideas, that changed the world not so long ago?
Isn't it long passed time, we changed it back to something that truly benefits, the actual living, breathing, and need-to-be-working American People?