Senator Levin’s one-sided report which he is expected to release tomorrow tells only one story about repatriation – his. To prove his predetermined outcome he recycles a mash-up of old studies and ignores a slew of more recent economic evidence and analysis that shows repatriation benefits the economy. Unfortunately, Senator Levin believes that Europe and Asia can do better things with the money than America. The real question is, should we allow American companies the freedom to deploy this money here or risk it being spent overseas?
Just last month, former Congressional Budget Office Director Douglas Holtz-Eakin published a study for the U.S. Chamber of Commerce examining the potential of a reduced repatriation rate, and found that it could help produce nearly three million jobs and increase the GDP. He wrote:
“First, cash that would otherwise be trapped overseas would flow back into the United States. The short-run stimulus provided by those dollars is difficult to project with great certainty but would speed the pace of economic recovery; increase GDP by roughly $360 billion and create approximately 2.9 million new jobs.”
A study by former Clinton administration official Dr. Robert Shapiro for the center-left think tank New Democrat Network finds that reducing taxes on repatriated earnings could lead to billions in revenue for the Treasury.
A look at the employment data from the Establishment Survey published by the Bureau of Labor Statistics (“BLS”) affirm that by far the greatest private sector job growth over the past decade occurred during the period when the 2004 Homeland Investment Act (HIA) was in effect. From 2000 through 2007, the BLS reports that the average annual private sector employment increased 4,385,000 (employment declined each year from 2008-2010, with an aggregate drop in average annual private sector employment of 8,043,000). Almost all (98%) of the average annual private sector employment increase for the period from 2000 to 2007 occurred in 2004-2006—the years during which the 2004 HIA was in effect—when the average annual private sector employment increased by 4,299,000. The biggest average annual private sector employment gains were in 2006, when the average annual private sector employment grew by 2,214,000. Steven Englander, head of G10 foreign exchange strategy at Citigroup, wrote in a recent research note that, “2005 was the only strong growth year in the decade in which U.S. growth was not fed by ‘bubble’ forces that eventually blew up.”
Senator Levin conveniently omits a key finding in one of the studies he cites (Dharmapala, Foley, and Forbes), which states that several of the uses of repatriated funds “could have an impact on U.S. growth, investment, and employment.”
Additionally, according to a 2008 survey of tax executives at over 400 firms by noted academics John R. Graham, Michelle Hanlon, and Terry Shevlin, 23 percent of repatriated funds went toward job creation, 24 percent toward capital investment, and 12.4 percent to pay down domestic debt.
Lastly, an examination of how many of the companies in WIN America used their repatriated dollars tells a totally different story from the one in Mr. Levin’s one-sided study:
- Oracle used repatriated funds to outbid foreign competitors to acquire two U.S. companies – one in California, the other in Minnesota. Oracle’s acquisition increased jobs at both firms, and helped keep the companies and their intellectual property in the United States. Between 2004 and today Oracle has grown its workforce from 42,000 to over 105,000 employees.
- Qualcomm brought back $500 million, which was used to assist in new acquisitions and the hiring of 8,200 employees. They also invested millions into the U.S. infrastructure, using repatriated funds to expand offices in California, North Carolina, and Nevada.
- Cisco used repatriated funds to create 1,200 R&D (mostly engineering) jobs. Since the 2004 law went into effect, Cisco has added 8,500 jobs in the United States.
- Adobe injected over $500 million into the U.S. economy when they repatriated global earnings in 2004. The money was used in a variety of ways including hiring new employees, completing acquisitions of smaller companies, and providing seed money for these companies to spend capital and enter untapped markets.
- Duke Energy brought back over $500 million in repatriated funds, which was directed towards wages, investments in capital projects, and expansion of its infrastructure and transmission/distribution networks.
- In 2004, CA Technologies repatriated approximately $580 million and paid $30 million in taxes. It used these funds to hire, train and compensate workers; for domestic R&D projects; and for acquisitions of U.S. companies like Wily Technology and Niku Corporation, keeping jobs here at home.
- After repatriating their global earnings, Microsoft added over 10,000 U.S. employees between 2004 and 2007.
- Brocade repatriated approximately $75 million in 2005. These monies were used to support workers’ wages and compensation, growing businesses and strategic investments. Since 2005, Brocade has increased its U.S. headcount both organically and through acquisitions from nearly 1,000 employees to more than 3,500 at the end of 2010.
We have a choice: bring the money home.
