Tax bill's job creativity diminishes

WASHINGTON, Oct. 13 (UPI) -- The possibility a tax break expected to be signed soon by President Bush will lead to lots of new jobs for U.S. workers appears to be vastly overstated.

Currently, U.S. corporations are required to pay a 35 percent tax on profits booked overseas, a tax policy that is unusual among developed economies. The U.S. law does contain an exception for profits that are "permanently" reinvested in overseas operations.

Known as the American Jobs Creation Act of 2004, the measure would let U.S. companies pay, for one year, a tax rate of 5.25 percent on the total amount of undistributed foreign earnings disclosed to the Securities and Exchange Commission prior to June 30, 2003. The funds saved could be spent for any purpose other than executive compensation, but companies must create a "domestic reinvestment plan" approved by senior management and directors.

While the measure was being debated, supporters claimed the bill would lead to 500,000 new U.S. jobs. That now appears about 10 times more optimistic than it will actually be.

Economist Allen Sinai, whose estimates were widely quoted by the bill's supporters, now says the measure will create only 50,000 jobs annually for the next few years.

Instead, companies are expected to use the extra money to pay down debt and buy back their own stock.