One of the pieces of Trump’s tax plan will ‘offer’ repatriation to companies with offshore cash to entice them to bring home some of the moolah they’re been hoarding.
The tax rate being floated is 10%.
Another official said Trump would propose a repatriation tax on offshore earnings of 10 percent, compared with the current 35 percent, the report said.
What would those tax-dodging..I mean qualifying companies do with all of that incoming money?
They have choices. They could:
-invest in their core businesses (talk about vague wording! major wiggle room)
-give out dividends to stockholders (the taxes on which would boost tax revenues a bit)
-repurchase company shares (which usually boosts the share price & makes Wall Street happy)
There may be more options that I’m unaware of.
By Goldman Sachs’ calculation, S&P 500 companies hold $920 billion of untaxed overseas cash, and the firm estimates that $250 billion of that would be repatriated. Looking at all US-based companies, Citigroup says there’s a whopping $2.5 trillion of capital stashed internationally.
And if you’re wondering if the repatriation will upset the U.S. Dollar, apparently it’s not expected to.
They “expect that the total amount of FX conversion resulting directly from a transition to [the new system] would likely be quite small — probably less than $50 billion,“ Goldman Sachs analysts Michael Cahill and Zach Pandl wrote in a note earlier this month.
That is because a lot of cash and equivalents held by American businesses’ foreign subsidiaries is already held in U.S. dollars or dollar-denominated instruments.
Must admit that I’m kind of curious what denominations that other $50 Billion is made up of!
About 50-80% of overseas cash, or $500 billion to $800 billion, is held in dollar-denominated assets, and “our best estimate would be closer to the high end of this range,” they said.
So, repatriation makes the financial markets very happy, companies who’ve been sitting on cash get to put big money into play, while also boosting their share prices. Everyone’s happy, right?
But I can’t help thinking-wouldn’t it be great if this big ol’ tax holiday came with a few strings attached?
For example, wouldn’t it make sense, and be reasonable, to a require that at least a minimum percentage was distributed in dividends? At least that option generates some tax revenue.
And why not include some provisions detailing what kind of investments into “core businesses” might be required? Does a huge bonus to what might be considered a key executive count as an investment, for example?
Lastly, do you suppose we’ll see any ‘resistance’ to Trump’s tax plan from our Democratic representatives?
It was somewhat discouraging to see Sen. Joe Donnelly (D-IN) traveling with Trump today. Will we hear even a fraction of the complaining about Trump’s tax plan as we heard about the possibility of repealing Obamacare?
Oh, and about that Air Force One trip Donnelly did with Trump to hear Trump’s tax speech, that didn’t turn out so well.
Then (Trump) reached across the aisle — more to twist Donnelly’s arm than to extend an overture.
“If Sen. Donnelly doesn’t approve it, because, you know, he’s on the other side,” Trump began, as he pointed his finger into the crowd, “we will come here, we will campaign against him like you wouldn’t believe.”
Please share what you know about repatriation or your thoughts on this and any other matters. Especially if regarding Trump’s tax plan. I heard that Bernie had some thoughts on the matter, for example.
One last thing, even the word ‘repatriation’ sounds Republican, lol. Don’t you think? The word means:
noun: repatriation; plural noun: repatriations
the return of someone to their own country.
“the voluntary repatriation of refugees”
the sending of money back to one’s own country.
“the repatriation of profits by foreign investors”
It sounds..downright patriotic! 😉
And in spite of today’s usual spate of challenges, Cheers!!!