Observers who have closely followed the Obama Administration’s many economic trial balloons may have noticed a trend—Each time Obama’s team really wants to fund their pet projects, they drag out the old saw-horse known as “Infrastructure Spending”.
On the surface, Infrastructure Spending would seem to be a rather non-partisan issue that all citizens could appreciate. This is exactly why it has been used time and again to justify new taxes and diversions of spending to the voters. The more controversial the actual intended beneficiary of the spending, the more it is presented as somehow related to “America’s crumbling infrastructure”, like that bridge that collapsed in Minnesota.
Remember the Stimulus Bill? You know the one—with all the shovel ready jobs rebuilding America’s crumbling infrastructure. As it turned out those shovel ready jobs did not exist. Time and again, however, these same ghost projects, ghost jobs, ghost opportunities have been touted as a necessary expense to be shouldered by taxpayers. Whether the money ends up being spent on wage support for state and federal employee unions, pork-barrel kickbacks, or partisan projects is of little consequence—all of these things can just as easily be called infrastructure as anything else can. It turns out anything can be called infrastructure as long as you are willing to believe anything the government tells you. Fancy that.
So what has brought about the comeback of Infrastructure Spending? Why it’s all of that offshore money that multinational corporations have been hoarding overseas to avoid America’s world-leading Corporate Tax Burden.
The proposal? An “amnesty” 14% tax rate on previously earned profits and 19% offshore taxes going forward. Which does not help in revising a tax code which has put US based corporations at an international disadvantage and has led some to consider “inversion”, which is a corporate maneuver that allows a company to change their country of record following a merger with a foreign company.
Raising the specter of Banana Republic economic agendas, Douglas Holtz-Eakin of the Action Forum asked, “Would you want to have your headquarters in a country that imposes one-off taxes?”
Illustrating the slippery slope nature of amnesties in general, the current offshore hoard has accumulated since the last “Offshore Amnesty” in 2004, with the top 20 companies that took advantage of this previous amnesty more than tripling their offshore holdings since 2005. While the last amnesty was passed with the intention of allowing these companies to repatriate their profits to create onshore jobs, most went instead to shareholders in the forms of dividends and share buybacks.
What is most interesting to consider is that while simultaneously proposing to raise taxes on investors and savers, Obama is also aiming to take a fairly large chunk of these offshore profits that have been earned by US businesses on both the front end—directly from the companies, and on the back end—directly from shareholders (otherwise known as taxpaying citizens). To use for what? Infrastructure, or so we are told.