Senate panel slams 2004 corporate tax break

— -- A Senate panel on Tuesday released a study that concluded a 2004 law that gave U.S. corporations a huge tax break to bring foreign profits back home did nothing to create jobs, undercutting new proposals for a similar initiative to boost the listless economy.

The report found that overall, firms that took advantage of the America Jobs Creation Act to repatriate overseas income from 2004 to 2006 actually cut jobs and research and development spending, while raising stock buybacks and executive pay.

Although the companies were required to use the money for job growth and other investment — stock buybacks and executive compensation were specifically prohibited — no documentation was required, the study noted.

"There is no evidence that the previous repatriation tax giveaway put Americans to work," said Sen. Carl Levin, D-Mich., who chairs the Senate Permanent Subcommittee on Investigations. Some companies moved operations overseas to get the tax break, causing job losses, said the report by the panel's Democratic majority. That contributed to a net $3.3 billion loss in tax revenue over 10 years.

Many Republicans, business trade groups and top corporations have called for a tax break for multinationals that repatriate foreign earnings, arguing it could pump as much as $1 trillion into the economy and create up to several million jobs.

Martin Regalia, chief economist at the U.S. Chamber of Commerce, says the Senate report ignores the fact that even stock repurchases and increased dividends boost consumer spending, which indirectly bolsters the economy and employment.

Overseas earnings of U.S. firms are taxed only when they're returned to the U.S. From 2004 through 2006, Congress allowed qualified foreign income brought home to be taxed at a 5.25% effective rate instead of the usual 35% to spur investment and hiring. All told, 843 companies brought back $312 billion that qualified for the lower rate.

The Senate panel examined the 15 firms that brought the most income home, accounting for more than half of all the earnings repatriated. It found they employed nearly 21,000 fewer people in the U.S. in 2007 than in 2004. Pfizer, which repatriated the most income, $35 billion, was the second-largest job cutter, slicing employment by 11,748.

Microsoft and Oracle added thousands of jobs, though Oracle's additions resulted from two acquisitions. It ultimately cut more than half the jobs it gained from the two mergers.

Oracle did not return phone calls.