Speaker of the House Paul Ryan (R-Wisc.) introduces a Republican tax legislation proposal, the “Tax Cuts and Jobs Act,” on November 2, 2017. Photo by Win McNamee/Getty Images.
The think tank whose report House Speaker Paul Ryan cited this weekend, saying that the GOP tax bill will create jobs, is chaired by the top executive on tax policy for a pharmaceutical giant that laid off workers after its last big tax break, who has donated money to Ryan and other backers of tax cuts, according to campaign finance records.
Ryan issued a press release on Saturday citing a new report by the nonpartisan Tax Foundation, which concludes that the House Republican tax bill unveiled last week will create the equivalent of about 975,000 full-time jobs. The Bureau of Economic Analysis’s definition of full-time equivalent jobs includes aggregated part-time positions.
— Paul Ryan (@SpeakerRyan) November 4, 2017
The Tax Foundation is a nonprofit organization prohibited by law from engaging in partisan activities, but it does push for tax policies it sees as favoring business. Its board includes executives from PepsiCo, PriceWaterhouseCoopers, and Microsoft, as well as former Republican Rep. Bill Archer and Douglas Holtz-Eakin, former economic advisor to President George W. Bush and the presidential campaign of Sen. John McCain (R-Ariz.).
The chairman of the Tax Foundation is David P. Lewis, vice president for global taxes and chief tax executive for Eli Lilly and Company, the multinational pharmaceutical maker. Lewis, Eli Lilly CEO David Ricks, and the company itself have been vocal proponents of the GOP tax bill. Ricks and other industry CEOs met with President Donald Trump on January 31 to discuss a range of issues, including the corporate tax rate.
In an email to TYT, Tax Foundation spokesman John Buhl wrote, “We’ve used our model to score a wide variety of tax plans from both Democrats and Republicans, using the same methodology and assumptions each time. Conducting independent analyses of tax proposals is what we do.”
Eli Lilly’s record on taxes and jobs came under scrutiny in 2011 as part of a Senate report. The report surveyed big companies about the impact of a temporary tax holiday on profits that had been kept overseas where they were exempt from U.S. taxes.
The report said, “Eli Lilly repatriated most of its qualifying dividends from a holding company which was located in Switzerland and employed 86 employees among itself and 12 subsidiaries. The remaining portion of its qualifying dividends was repatriated from an investment holding company which had no employees and was located in the British Virgin Islands.”
Eli Lilly reported repatriating $8 billion at a tax rate of 5.25 percent thanks to the 2004 tax-holiday law, which was called the American Jobs Creation Act. In its 2005 annual report, the company said that, “The proceeds [from the tax holiday] . . . have been or will be used for research and development activities, capital asset expenditures, and other permitted activities.” Hiring was not specifically mentioned.
In the years following, Eli Lilly’s U.S. headcount shrank from 22,751 in 2004 to 20,924 in 2007, the Senate report found. The company’s annual 10-K filing with the SEC for 2016 says it had 41,975 employees at the end of last year, 23,115 of whom were employed outside the U.S., indicating that Eli Lilly’s U.S. workforce stood at approximately 18,860.
Lewis has served as an occasional spokesperson for Eli Lilly on tax issues, publicly pushing for lower rates. After a 2014 study by the liberal group Citizens for Tax Justice, in partnership with their sister organization the Institute on Taxation and Economic Policy (ITEP), found that Eli Lilly effectively paid no taxes for an entire year, Lewis responded.
“Accounting for income taxes is complex and cannot be simplified as has been done in this report,” Lewis told the Indianapolis Star. The paper did not quote Lewis as denying the report, but added that he said, “In paying our taxes, Lilly is in full compliance with all laws worldwide.” (Two years earlier, the company had paid $29 million to settle SEC claims it broke other laws in its global business dealings.)
In his remarks to the Star, Lewis also said he supported a GOP proposal at the time to lower corporate tax rates to 25 percent, calling it a “positive step toward comprehensive tax reform to grow our economy.” This year, Lewis has publicly advocated for lower taxes in an interview with Fox Business and in a statement to the Washington Examiner.
According to data maintained by the Center for Responsive Politics, Lewis gave Ryan $1,000 last year, and is a recurring contributor to the Eli Lilly Political Action Committee, which has also donated to Ryan. According to CRP’s data, the Eli Lilly PAC has given 30 percent of its political donations during the 2018 election cycle to Democrats, and the rest to Republicans.
Emails to representatives for Eli Lilly and Speaker Ryan had not been returned as of press time.
The current tax battle has led to the work of Lewis’s think tank being cited not just by Ryan, but by his own company.
In a February 21 letter sent to congressional leaders, Ricks joined 15 other pharmaceutical executives advocating for tax cuts on the basis of a Tax Foundation study. The study estimated that GOP proposals being floated at the time would create 1.7 million jobs.
Although the 2004 tax holiday was enacted in part to encourage companies not to keep profits overseas, today Lilly reportedly has $28 billion sitting outside the U.S., more than three times the amount it repatriated just over a decade ago. The statutory corporate tax rate in the U.S. is currently 35 percent, but a broad range of deductions and credits allows many companies to lower the rate they effectively pay.
The GOP tax bill now being worked on in Washington would lower the statutory rate to 20 percent. Eli Lilly reported an effective income rate last year of 18.9 percent and a 2015 effective rate of 13.7 percent.
In September, the company announced it would eliminate 3,500 positions.