Tax breaks, but no jobs

Two weeks before the election, President Bush signed the American Jobs Creation Act of 2004, which doled out $137 billion in tax breaks to corporations, with the idea they would use the windfall to put more Americans to work.

It was the largest corporate tax overhaul in two decades and probably the most eclectic group of winners ever. Besides breaks for General Electric, Hewlett-Packard, oil companies and the other usual multinational suspects, there was also largess for bow-and-arrow firms, tobacco farmers, movie producers and NASCAR race promoters. But drug companies will reap some of the largest benefits, thanks to a provision that creates a one-year window to shift profits to the United States at a 5.25 percent tax rate, instead of the standard 35 percent. Drug makers can move profits overseas and back more easily than other businesses with less forgiving accounting practices. The ability to send money where the taxes aren't has allowed the six major drug companies -- Pfizer, Johnson & Johnson, Merck, Bristol-Myers Squibb, Wyeth and Lilly -- to reduce their worldwide taxes to a fraction of the normal rate.

The big six are likely to return about $75 billion in profits to the United States during the grace period and save roughly $22 billion in taxes. These are the same companies that profess outrage when consumers try looking outside the U.S. to save a few dollars on drugs from Canada. These are also the same companies that flood prime-time television with commercials, while maintaining it is the high cost of research and development that makes prescriptions expensive. Industry analysts say the drug companies make most of their profits in the U.S. market, though they have claimed otherwise on the advice of their accountants.

The law set no specific requirements on how to spend the tax savings, and the drug makers aren't proposing any. The idea that the tax breaks will create new jobs seems a distant memory.