Postcards From a Tax Holiday

Published: November 12, 2005

PepsiCo recently followed in the footsteps of Hewlett-Packard, Pfizer and other big American corporations by initiating layoffs - even as it takes advantage of a huge tax break that was supposed to generate cash for hiring.

The tax break, passed by Congress last year as part of the American Jobs Creation Act, lets American companies bring foreign-held profits back to the United States this year at a discount of up to 85 percent off the normal tax rate. So far, nearly 100 companies have announced repatriations totaling more than $200 billion, all of which will be eligible for the cut-rate of 5.25 percent, instead of the usual top rate of 35 percent. As its critics warned at the outset, the so-called tax holiday has proved to be a bigger gift to shareholders than to employees and job seekers.