Tax break meant to spur job growth prompts layoffs Options

[rox63]

From the Wall Street Journal:

http://online.wsj.com/article_email/0,,SB1...HcKWDm4,00.html

Layoffs Seem to Conflict With Tax Break Meant to Propel Job Growth

By STEVEN D. JONES and MICHAEL RAPOPORT
DOW JONES NEWSWIRES
March 10, 2005; Page C3

There is more evidence that a tax break intended to boost U.S. jobs isn't getting the job done.

Consider several major companies that say they are considering bringing home hundreds of millions of dollars in foreign profits under a tax holiday that is part of the American Jobs Creation Act passed last year. These include National Semiconductor Corp., Sun Microsystems Inc. and Colgate-Palmolive Co. -- all of which recently cut staff. These companies' example calls into question how effective "repatriation" will be in spurring new jobs, adding to already reported concerns about the wiggle room the law gives companies in how to spend the money.

National Semiconductor disclosed in January it may repatriate as much as $500 million in foreign earnings under the tax break. The same day, the company announced it would cut 550 jobs, or 6% of its work force, to cut costs and streamline operations.

Sun said in February that it could bring home as much as $1.1 billion in foreign profits. The company also said it had laid off 3,600 people -- about 10% of its work force -- during the previous nine months as part of a plan to reduce costs and improve efficiency.

Colgate-Palmolive said in December that it expected to close about a third of its factories and eliminate about 12% of its work force -- a total of about 4,400 job cuts -- in a four-year restructuring plan. In February, the company disclosed it was considering bringing home $500 million in foreign profits.

In the past 10 weeks, nearly 300 companies have unveiled plans to capitalize on the one-year tax holiday, one of a number of business tax changes contained in the American Jobs Creation Act. Under the repatriation provision, companies will pay a 5.25% tax rate on money they have earned and invested abroad and choose to bring back to the U.S., compared with the standard 35% corporate rate. Analysts expect the law will encourage hundreds of companies to return an estimated $320 billion to the U.S. economy by the end of the year.

But the law gives companies flexibility to use the cash for purposes with indirect links to job creation at best. According to the Treasury Department, companies can use the cash for advertising and marketing, certain acquisitions, capital investment, research and development and "financial stabilization" such as debt reduction and payment of legal liabilities. The Treasury's guidelines require only that companies attest that the spending "likely would have direct or indirect positive effects on employment in the United States."

"The bill as enacted does not have a close link between repatriation and some form of job creation," says Stephen E. Shay, a tax partner with the Boston law firm of Ropes & Gray. "It's best characterized as a fig-leaf relationship."

Mr. Shay adds that it is "not inconsistent with the law" for companies to cut jobs at the same time they are considering repatriating funds ostensibly meant to create jobs. They are just following the law as it is written, he says.

Jeff Weir, a spokesman for National Semiconductor, says bringing home foreign profits won't necessarily lead to higher employment, "because the nature of the technology business is that we tend to produce more with fewer people over time." While National Semiconductor is hiring engineers in specific areas and has since 2001, its total employment is down to about 9,000 from 11,000 at the peak of the technology boom, he says.

A Sun spokeswoman says the company's evaluation of repatriating foreign profits was going on separately from the announced staffing changes. A Colgate-Palmolive spokeswoman won't comment on the company's plans for repatriation or job cuts.

Even if companies do use their foreign cash to invest in job-creating projects, they may find that changes elsewhere in their business can mute job gains.

For example, DuPont Photomasks Inc. is repatriating $24 million in foreign profits, some of which it is applying to a $30 million expansion of production capacity at its Round Rock, Texas, plant. But the company also announced in January that it would close its Kokomo, Ind., plant -- eliminating 100 jobs, or about 6% of its work force -- and said it is expanding capacity at a Singapore plant.

DuPont Photomasks -- photomasks are tools used for putting computer chip circuits on silicon wafers -- won't say whether the employment gains from the Texas expansion are enough to offset the Indiana losses. But Tom Blake, the company's vice president of marketing, says the changes are simply "a reflection of changes in the marketplace." The Kokomo plant produces an older technology and closing it was necessary to improve total productivity, he says, and the company is expanding in Asia because it is a fast-growing region. Indeed: DuPont Photomasks is in the process of being acquired by a Japanese company, Toppan Printing Co.

National Semiconductor's Mr. Weir, who used to work on Capitol Hill, says repatriating earnings should be seen simply as a tax break. Calling the law "the American Jobs Creation Act" was marketing, he says. "I would not trust the title of any law and what it really says."

[USA#1]

Sounds like it just kept the accountants a little busier and the HR Department hopping offering re-training programs and early retiements.

How Sad and awful they keep playing paint the pig with another shade of lipstick.

[Kmarx]

The problem is not outsourcing, tax breaks for the rich or other such practices. These are just symptoms! The problem is that we have the worst combination possible -- insatiable greed, capitalism and a jackass in the White House whose goal it is to make America what unbriddled capitalism was invented to do: create a country of aristocrats and slaves!

[grammydidi]

National Semiconductor's Mr. Weir, who used to work on Capitol Hill, says repatriating earnings should be seen simply as a tax break. Calling the law "the American Jobs Creation Act" was marketing, he says. "I would not trust the title of any law and what it really says."

This says it all!!!!!!!!!!!! Just like the NCLB, the Clear Skies thingy, etc. etc. Just more Bush & Co. lies!!