Repatriation – The Progressive Wing

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.

Trump twists Democratic Sen. Donnelly’s arm over taxes in Indiana

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:

re·pa·tri·a·tion
rēˌpātrēˈāSH(ə)n,rēˌpatrēˈāSH(ə)n/

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!!!

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Benny

I had heard from someone that 10% was the starting figure. It is too low. They should start negotiating higher. Otherwise other companies want a lower rate or they threaten to go overseas.

What’s reasonable for educated workers? Infrastructure? Healthcare? I’d like to see Bernie engage executives from the larger Fortune/tech companies.

What would congress do? Clinton’s plan was to accept repatriation in return for infrastructure spending. 10% is too low.

magsview

It would be great if Democrats put up a fight and said 10% was too low.

From what I’m reading, the last time it was done was in 2004 and Bush let it come in at a tax rate of 5.25%.

https://en.wikipedia.org/wiki/Repatriation_tax_holiday

A similar effort more than a decade ago provided a nice windfall for firms, which then passed along most of it to shareholders in the form of share buybacks and dividends. The effort provided little in the way of hiring and in fact saw some of the beneficiaries actually cut payrolls.

And in 2004 it “flopped” per CNBC (of all sources to say such a thing!).

there’s the issue of what happens to that money. When then-President George W. Bush tried the idea in 2004, the results provided little economic boost.

https://www.cnbc.com/2017/08/31/trumps-tax-repatriation-plan-flopped-the-last-time-it-was-tried.html

I also saw this:

a one-time tax on their existing foreign earnings, which they could pay over a period of time, senior administration officials said.

https://www.recode.net/2017/9/27/16373044/president-donald-trump-republicans-tax-reform-tech-repatriation

(Sorry for all the rough links, my linky function no working, prob need to refresh)

So, yes! I agree with you! With the expected benefits being so minimal, the tax rate should start higher than 10% “over a period of (not defined) time”!

And yes! This encourages companies to go overseas, earn profit in ultra-low tax rate havens all over the world, because they know that eventually they’ll get these tax holidays.

Also, and I hope I’m not bugging you 😉 this topic hypes me up a bit, I must admit that I was suspicious of Clinton’s plan.

The Clintons are fans of the ‘public-private partnerships’ thing. And to me that means that even the infrastructure spending, as Trump has proposed, would involve far too much profit-making by private/corporate interests using taxpayer funds.

I’m from Canada, as you know, and grew up in an environment of more government involvement in such huge undertakings as major infrastructure spending. Not all governments just hand such costly projects off to private companies.

I’m certainly not saying that Canada’s system is necessarily better, there would sometimes be complaints of waste, and even fraud, but I’ll bet that overall the costs were lower. I’ll look into it further.