,/center>Posted on 12/26/2019 7:39:00 AM PST by Diana in Wisconsin
For decades before President Donald Trump’s tax plan took effect, U.S. corporations with foreign subsidiaries had no (sane economic) choice but to keep their overseas profits abroad. After all, they’d face double taxation if they wanted to bring them home. Their profits were already taxed by the foreign country they’re operating in, and then to repatriate those funds would’ve required them to pay the U.S. corporate tax rate, which was then among the highest in the world. By year end 2017, right before Trump signed his Tax Cuts and Jobs Act (TCJA), upwards of $2.5 trillion in cash was parked overseas.
The TCJA reduced the corporate tax rate from 35% to 21%, but offered extra incentives to repatriate cash. After all, we’d rather have that money in America for economic reasons regardless of how much the government can get their hands on. The Trump tax law allowed corporations to repatriate cash at a discounted 15.5% tax rate, and a reduced 8% rate to repatriate other assets that are non-cash or illiquid.
While estimates differ on how much cash was parked overseas pre-TCJA, between 40% and 66% has made its way back to America.
"Corporations have brought back more than $1 trillion of overseas profits to the U.S. since Congress overhauled the international tax system and prodded companies to repatriate offshore funds, a report showed. The flow rose to $95.3 billion in the third quarter from a downwardly revised $70.4 billion in the previous three months, according to Commerce Department data, reaching a total of $1.04 trillion since the end of 2017."
"Investment banks and think tanks have estimated that American corporations held $1.5 trillion to $2.5 trillion in offshore cash at the time the law was enacted."
And it’s not just business doing well. Real disposable person income rose by nearly $6,000 since the TCJA, of which nearly half can be attributed to the tax changes (based on how much wages grew above projections).
For as much as liberals will try to convince you otherwise, it’s undeniable that the Trump tax cuts worked.
,/center>Supply side pro business economics without calling it supply side pro business economics. That’s smart politics.
And he didn’t need a magic wand; he just needed then government to stop stepping on the air hose of the economy...
Plus a percentage of that went to the IRS and Treasury. Not insignificant.
and using some of that money for stock buybacks and increased dividend payouts helps many
then to repatriate those funds would’ve required them to pay the U.S. corporate tax rate,
As far as I know, in general, the taxes paid to a foreign country are a credit toward taxes due in the United States. This is also true for your state taxes, i.e. taxes paid in another state are a credit toward you state taxes.
So there are other issue involved here besides the taxes.
This is one of the two most significant impacts of the Trump tax reform. Contra TDS Paul Krugman, it’s NOT just that companies could keep more of their profits, it’s the effect on incentives.
The more significant impact is the repatriation of American MANAGEMENT. Prior to the tax reform, the dumbest thing any multinational company could every do was to have their headquarters in the United States and make all their worldwide profits subject to confiscatory U.S. taxation at double the worldwide average tax rate.
Now being an American company is no longer something to avoid.
It’s funny how economists like Krugman spend so much energy talking about the effect of tariffs on behavior but when it comes to income tax reductions they say the only thing it does is make corporations richer.
If the foreign tax rate was 20% and the US rate was 35%, they'd still owe the 15% difference to bring the profits home.
If the foreign tax rate was 20% and the US rate was 35%, they’d still owe the 15% difference to bring the profits home.
BINGO!
The Dems are mad because they didn’t get their greedy paws on any of it!..............
Good comment
Thanks! Sorry about the typo...
Promises made and kept.
True, but Congress couldn’t help itself and spent it all plus some (and, in fairness, Trump was part of the spending binge too). There is no more fiscal restraint. Both parties have decided that it doesn’t work politically so we’ll keep spending until we go bankrupt.
This is one of the biggest fights I have whenever I talk about corporate taxation. No one seems to want to believe that not one single corporation has ever paid one penny in any tax of any kind.
The consumers pay the tax as part of the purchase price. The corporation always passes the tax along, just like any business or any organization.
None of them pay any tax, we pay it all.
Yes, it helps the shareholders and many people have a stake via mutual funds, etc.
The problem is the repatriation was supposed to lead to more business investment and therefore long term growth, but that hasn't happened.
The corporations didn't invest the money, they gave it to the shareholders.
The corporations didn’t invest the money, they gave it to the shareholders.
+++++
I suppose you could be right about that. But I seriously doubt it. You will need some real evidence to convince me.
“Promises made and kept.”
WINNING!
I had a conversation with a few Libs the other day. It was Christmas and I had to - I’m related to them. (Yes, I know. It amazes me as well!)
Anyhow, I cannot believe the level of pessimism that still exists in their weird little world!
ALL of them are employed, as are their kids! They’re all buying homes and taking vacations, welcoming Grandkids into the fray, and yet this all-encompassing Debbie Downer attitude of theirs about the (fantastic!) economy and all that President Trump is accomplishing for US is just MIND BOGGLING to me!
Liberalism IS a Mental Disorder. I’ll never understand it.
“The corporations didn’t invest the money, they gave it to the shareholders.”
Who, in turn, pump it into the Economy one way or another!
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