Big-Pharma Finds More Loopholes
You may recall that Congress passed tax relief last fall for U.S. based multi-national corporations to bring foreign profit back home in the hopes of spurring job creation.
Otherwise known as the American Jobs Creation Act, this Trojan horse of a bill actually cut taxes on foreign profit from 35% to just 5.25% on the first $75 billion a company repatriated this year in the hopes that market fundamentalism would prove true and the money would trickle on down for new job creation.
Needless to say, that has not happened. As I noted earlier, many of the companies who stood to gain from the profit actually planned on cutting jobs or using the money to take over another company.
Now it turns out the pharmaceutical companies will reap the biggest benefit:
"Drug Makers Reap Benefits of Tax Break" [NYT]: Already, four of the six drug makers have collectively announced plans to return $56 billion in profits to the United States. Two others say they are still considering but could repatriate an additional $18 billion. Had the six companies faced standard federal taxes on those profits, they would have paid $26 billion to the United States. Instead, they will pay less than $4 billion
Although the act is intended to create jobs, Pfizer said last month that it would cut its annual costs by $4 billion over the next three years. Pfizer, which will repatriate at least $28 billion under the act, did not say how many jobs it planned to eliminate, but analysts expect the company to shrink its work force by thousands of people. Mr. Senyek said the law would create an insignificant number of jobs because companies can easily work around provisions in the law meant to stop them from using the money for dividends to shareholders rather than new hiring.
Congress just seems to keep making it easier for corporations to get out of paying taxes, further shifting the tax burden onto middle class families - and its not just foreign profits that escape getting taxed.
Between 2001 and 2003, 252 of the biggest U.S. corporations avoided paying taxes on nearly two thirds of their U.S. profit! And the price tag for state governments? Just a tiny $42 billion.
Just to take Pfizer as a recent example,
Because they report relatively low United States profits, the companies pay little in American taxes compared to their profits. Pfizer reported paying only $1.2 billion in state and federal income taxes in 2004, 9 percent of its worldwide pretax profit. Excluding a one-time payment related to its plans to repatriate money it has sheltered overseas, Lilly reported paying just $37 million in state and federal taxes last year, only 1 percent of its worldwide pretax profit.
And people wonder why states can’t seem to balance their budgets.
[X-posted at Freiheit und Wissen]