Posted by ScottH on 08/14/2011 - 09:00
What if I told you I knew a way for the government to provide a $1 trillion stimulus to our economy and it would not cost taxpayers a penny (in fact, it would create a huge windfall of new tax revenue) – would you be interested in learning more?
It sounds too good to be true, right? Well, actually no, it is available to us right now, but it has become very political (hard to imagine anything in Washington DC becoming politicized).
U.S. companies have over $1 trillion of offshore earnings that have never been taxed in this country. Nearly all industrialized nations apply a "territorial tax system" in which companies with operations or affiliates abroad pay only the taxes imposed on profits by the host country. So in Sweden, England, and China multinational companies can, in most cases, ship earnings home with little or no extra tax imposed.
American companies pay foreign taxes, some of which they can offset against their U.S. tax liability. But any funds they return (i.e. repatriate) - to buy back stock, build a plant, pay a dividend - get hit with U.S. corporate taxes, which reach as high as 35% at the federal level, the second highest in the developed world.
This additional tax is a tremendous disincentive for these corporations to bring this money back to our country. Every member of congress would love to have this money pour into our country to boast our economy. The $1 trillion question is – do we give these corporations a tax break to return this capital and if so, how much?
There have been discussions on Capitol Hill to allow a one year “tax break” to allow those profits to come back and be taxed at 5.25% as opposed to the normal 35%. Of course, those on the right think this is good policy and would love to see this repatriation tax holiday made permanent, while those on the left hate the idea of giving another huge tax break to big business.
What do you think? Should we be giving a repatriation tax holiday or make it permanent?
- 1096 reads
It would not create jobs in America
Corporate America is presently sitting on $1.6 trillion; so why would it invest in capital assets that would create jobs in America if we gave it another tax holiday.
And recall when this was last done under George W. Bush, jobs were not created.
Also the repatriated tax rate you quoted was higher than the rate I read: I heard it would be as low as 2.5% to 3.25%.
When these multinational corporations with foreign income from operations in foreign lands create jobs, why would they bother to bring the money to the U.S. to create jobs here in America and pay wages 100 times what they could pay personnel in foreign lands after setting up all those factories and manufacturing operations in Asia and India? Those monies repatriated would merely come home to be distributed in bonuses to the corporate executives as well as in dividends to its investors.
I heard another old joke besides repatriation: if you don't tax the rich, it trickles down to the middle class.
It's the same old voodoo economics from the rich but with a twist so that the middle class doesn't recognize the oldest con from the beginning of time: if you give all the money to the rich, they will be benevolent lords (noblesse oblige) and take care of you. I stopped believing in Santa long ago.