Former Hewlett-Packard (HP) CEO and now presidential candidate Carly Fiorina says she should be president because she knows how the economy works. She entreated those who “believe that it's time for citizens to stand up to the political class and say enough,” to give her their support.
Soaring rhetoric fits an announcement for political office but doesn’t answer questions about where a candidate stands on important issues. Based on what we know from her time as a corporate CEO and a candidate for the U.S. Senate, Fiorina’s call for the public to stand up to the political class may be all talk. Instead, she may ally with corporate influencers.
As a U.S. Senate candidate in California in 2010, for example, Fiorina called for a lower tax rate for multinational corporations that repatriate offshore income as part of a laundry list of shortsighted tax policy proposals in her economic platform. Her support for a lower tax rate on repatriated profits is not surprising given how much it benefited her former employer.
HP used a one-time repatriation holiday during Fiorina’s tenure and likely avoided billions in taxes. In 2004, Congress passed a repatriation holiday as part of the American Jobs Creation Act. The holiday allowed companies to repatriate their offshore income at a maximum rate of 5.25 percent, rather than the 35 percent that they would normally owe (minus what they have already paid in taxes to foreign countries). The alleged idea behind the holiday was that it would spur companies to invest these earnings in their American operations and create more jobs.
Under Fiorina’s leadership, HP repatriated $14.5 billion using the repatriation holiday, meaning that it likely received billions in tax breaks compared to what it would have paid if it had been subject to the 35 percent rate. Despite receiving this generous tax break—intended to create jobs--HP cut 14,500 jobs from its workforce during the two years following the holiday. HP’s job cutting is indicative of the fact that many companies that used the repatriation holiday used these earnings to benefit wealthy shareholders by issuing dividends or buying back stock, rather than making new investments that would lead to job creation.
As CTJ has repeatedly pointed out, “repatriation holidays” incentivize corporations to hold more of their profits offshore in anticipation on Congress passing another tax reprieve. Before the 2004 holiday, HP held about $15 billion offshore, most of which it repatriated in 2005. Since then, HP has accumulated a staggering $42.9 billion in profits offshore.
We don’t know whether a new repatriation holiday will be part of Fiorina’s presidential campaign, but the idea she championed as a Senate candidate and used to her company’s advantage as a CEO has unfortunately begun to gain steam in Congress as a way to pay for much needed infrastructure spending through the Highway Trust Fund (HTF).
A better way to address the perennial funding gap in the HTF would be to increase the federal gas tax, which has not been raised since 1993, while gas prices are remain low. Fiorina has opposed this approach, writing in a February op-ed that the federal government should instead eliminate all of its investments in mass transit and other alternative transportation infrastructure.
Fiorina’s opposition to raising the gas tax and her support for a repatriation holiday are just two of her bad policy proposals. She also has called for repeal of the estate tax and previously supported full extension of the Bush tax cuts. Fiorina may have said she “understands how the economy works” and intends to “stand up to the political class,” but based on the limited amount we know about her tax policy so far she hasn’t deviated from the Republican political class’s standard agenda.