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.
Either way, there is no bad time to reduce the highest corporate tax rate in the world.
It may well have extended the recovery and having competitive corporate taxes is a good thing.
It doesn't change the fact that Steve Moore and Larry Kudlow's talking points were BS aimed at the credulous.
I'm not naive but it bothers me when politicians try to blow smoke up my ass because they're afraid to make an honest argument.
A simple example for the simpletons is to tell them that when California raised the gas tax 12 cents, that the price of gas at the pump went up 12 cents. The gas companies weren’t taxed, the customers were. Any other tax on businesses works the same way. It’s the customers who pay the tax.
Anything specific you have a link for?
I'm not naive but it bothers me when politicians try to blow smoke up my ass because they're afraid to make an honest argument.
Politicians overselling their policies, outrageous!
Unless they can't raise prices, then the investors/owners pay. Or if they go out of business, their employees pay.
2 nations taxing the same money for the same reason sure seems like double taxation. Perhaps if it happened to you, the term might not be as annoying as the fact.
They both claimed the tax cuts would pay for themselves via higher sustained growth than the CBO predicted - in excess of 3.5% GDP. They also predicted that corporate tax revenues would increase due to the higher growth. Corporate tax revenues dropped by more than 1/3rd in 2018.
If you really don't remember their spin, here's a LA Times recap of a CRS study that discusses their predictions vs. reality.
I haven't read the book myself but reviewers have claimed that in Trumponomics they take credit for convincing GOP Congressmen that the corporate tax cuts would pay for themselves. They also touted up to 6% sustained GDP growth.
Do you really not know the history of these guys?
Politicians overselling their policies, outrageous!
Just because it's the norm doesn't mean it shouldn't be called out.
Conclusion
Japan is a country with a complex multilayer system to calculate the corporate income tax. As a consequence, the CFC income determination has evolved as a complex set of rules to complement the corporate income tax. It would be a great idea for the Japanese authorities to address a simplification of the rules to facilitate the entry of new capital investments into their economy.
https://taxfoundation.org/japanese-cfc-rules-japan-tax/
The reality is not the issue of not being taxed. The ISSUE is the home tax rate being greater than or less than the foreign tax.
My issue is the MENTAL IMAGE OF DOUBLE TAXATION which not true in the NET transaction.
Here is easy understandable interesting information on foreign taxes. But most won’t take the time to read it.
https://taxfoundation.org/much-u-s-multinational-corporations-pay-foreign-income-taxes/
1) foreign taxes varies a lot by country. avg effective tax rate of 27.2%. Yes this 2010 data but I found no indication of change.
2) Trump has changed the effective US rate to 21%.
3) So that means they can they can bring money back here with NO ADDITIONAL TAXES. This change does not bring in current revenue, but future tax revenue. In fact foreign look higher.
4) But, there are state corporation taxes due. Iowa is 6-12%. So in reality this puts us on EQUAL tax footing with the rest of the world. We didn’t give anything away.
5) The issue is not if income is taxed or not, the issue is what is the NET tax rate.
6) If tax rates are neutral world wide, what is the incentive to bring business back to US? That answer is REGULATIONS and RISK.
7) if foreign countries get it, they will also reduce taxes like Ireland and we will have world wide growth.
8) Trump is playing a LONG TERM GAME, but we are also getting short term wins.
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