Using a repatriation tax holiday — a tax break for companies bringing back overseas profits to the U.S. — to help fund an ‘infrastructure bank,’ would be a good idea, GE Chief Executive Jeffrey Immelt said at the U.S. Chamber of Commerce on Monday. Lawmakers have proposed starting a national infrastructure bank to provide low-interest loans and loan guarantees to build highways, energy projects and water infrastructure.“We favor repatriation of our foreign cash back into the U.S., where it can do some good,” Immelt said. “I believe Senator Schumer has a good idea: taxes from repatriation could go toward creating the infrastructure bank that in turn creates jobs.”
Sen. Charles Schumer (D., N.Y.) has said that his party would be willing to consider a tax repatriation holiday, provided the companies that benefit from the lower tax rate use the funds to help create jobs.
Under a repatriation tax holiday, U.S. companies would be enticed to bring foreign profits back to the U.S. by taxing them at a roughly 5% tax rate, rather than the current top corporate rate of 35%.
mmelt told reporters after his speech that he wasn’t sure how much support there was for a repatriation tax holiday. Academic analysis of a previous repatriation tax holiday in 2004 showed that companies then used the profits more for share buybacks and dividends than for creating new jobs. But Immelt said the current economic backdrop made the situation different now.
The last time this was tried was in the last expansion which had some of the weakest job growth on record, so we know the "this will create jobs"argument doesn't work. However, using the money to fund infrastructure makes perfect sense and should be done ASAP.
5 comments:
Ok, the TAXES on those repatriated funds would pay for some infrastructure jobs, but without demand to buy new products, what good will the repatriated funds themselves do for the economy? Windfall dividends for stockholders? Repatriating corporations buy back their own outstanding shares thus enriching stockholders? Restructure debt instruments thus enriching bondholders? Do I detect a theme here?
But don't worry, SOME of that wealth will trickle down to the workers, right?
Uh huh.
How about this plan? If you want your money back in this country, SHUT UP, AND PAY YOUR EFFING TAXES!
article in fit quite interesting to read so that adds new knowledge to my
So basically, we get them to repatriate monetized profits sitting overseas for tax-avoidance purposes by offering them a 30% discount on their taxes, and they say "Only if we can dictate how the revenue is used?"
I have a better idea: they get the tax holiday, only pay 5% tax on the repatriated profits, and federal gov't spends the 5% tax revenue as it likes. However, half the difference (i.e., 15% of the repatriated profits) must be invested in an infrastructure bank, which shall pass the low interest rates it charges on infrastructure loans back to the companies repatriating the profits, tax free. Now that is a plan I could get behind. I think it sounds pretty fair, really, and if Immelt and the USCC are real patriots, they'd get behind it, too. That's another story though...
The problem is that if we continue to enact these repatriation holidays, companies will actually be incented to keep as much of their profits overseas as possible. Why recognize revenue in the US when in a few years you can bring that money back at a 5% tax rate.
Corporations are flush with cash right now. Being able to bring back that money won't lead to creating jobs, it will just lead to them using that cash to buy their own stock to inflate it's value (as was true in the past). What we should do instead is not only tax that money at the 35% rate, but also for them to pay those taxes now. Then if we want to fund an infrastructure bank with part of that money, great, but we'll have a lot more money to work with and less of a deficit.
UN PRESIDENT TIM KALEMKARIAN, US PRESIDENT TIM KALEMKARIAN, US SENATE TIM KALEMKARIAN, US HOUSE TIM KALEMKARIAN: BEST MAJOR CANDIDATE.
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