In an uncharacteristically short speech, President Trump went over the broadest strokes of the tax plan he and Congressional Republicans plan to unveil.

The speech covered four main proposals, and the last one — a tax holiday for American multinational corporations that have cash stashed overseas — is a proven, abject failure. We tried it under President George W. Bush in 2004, and subsequent investigations into the policy showed that it didn’t help. If anything, it hurt.

But first, the Trump vision of tax holidays, from his speech.

“Because of our high tax rate and horrible, out-of-date bureaucratic rules, larger companies that do business overseas will often park their profits offshore to avoid paying high US taxes if that money is brought back home. So they leave the money over there,” Trump said.

He then marveled at the $US3 to $US5 trillion kept offshore, asking the crowd: “Can you believe it?” He said that if that money was brought back home and taxed at a lower rate it would spur investment in “struggling communities” and prompt companies to hire more workers.

We tried this in 2004, and it didn’t work. That year American companies brought $US312 billion back home to be taxed at a rate of 5.25%. The promises then were the same as they are now — bringing this money back at a lower rate will get companies to hire and invest.

But that’s not what happened, according to a 2011 Senate Subcommittee on Investigations probe, spearheaded by retired Senator Carl Levin (D-MI). The report looked at the top 15 companies that took advantage of the holiday and tracked what they did with the money. The companies included Altria, Bristol-Myers Squibb, Coca-Cola, DuPont, Eli Lilly, Hewlett-Packard, IBM, Intel, Johnson & Johnson, Merck, Oracle, PepsiCo, Pfizer, Procter & Gamble, and Schering-Plough.

From the report:

The report looked at the top 15 repatriating companies and found that, instead of spurring jobs and economic stimulus, the tax break was instead associated with increased corporate stock buybacks and executive pay. The report also observed that the 5.25% tax rate created a competitive disadvantage for domestic businesses that chose not to engage in offshore operations or investments, and provided a windfall for multinationals in a few industries without benefitting the U.S. economy as a whole. “There is no evidence that the previous repatriation tax giveaway put Americans to work, and substantial evidence that it instead grew executive paychecks, propped up stock prices, and drew more money and jobs offshore,” said Levin. “Those who want a new corporate tax break claim it will help rebuild our economy, but the facts are lined up against them. That’s why think tanks from the left and right have condemned another repatriation tax break as an unaffordable giveaway to multinationals that have stashed billions of dollars offshore and are now lobbying to get out of paying their fair share of taxes.”

Republicans proposed a tax holiday again in 2014, setting the rate at 9.5%. That’s when the Center on Budget and Policy Priorities (CBPP) released another report outlining even more problems with the policy. “In reality, a repatriation tax holiday would accomplish neither goal and instead would worsen the nation’s fiscal and economic problems over time,” it said.

Here are the broad strokes, since that’s what we’re doing these days:

The holiday is a revenue loser for the government, which means it can’t pay for much needed infrastructure improvements or fund social programs.

It rewards companies that take cash overseas.

If the US makes a habit of these holidays, companies may stash even more money overseas in order to get a better rate during the next go-round.

Companies don’t actually spend the money they have saved on hiring people or research and development or capital expenditures. Like Senator Levin, the CBPP found that companies mostly spent this money on stock buybacks.

“Indeed, the ten companies with the largest stockpiles of foreign profits paid out more than $US107 billion in cash to shareholders through share repurchases in 2013, suggesting that they are not cash-constrained. Moreover, seven of the ten companies with the largest stockpiles of foreign earnings in 2013 also ranked among the top ten U.S. companies by share repurchases,” said the report.

It’s bad enough that this is a bad idea. It’s even worse that it’s a stolen bad idea.

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