4 ms·

Once corporations have exhausted their large hoard of overseas cash, the amount they repatriate will go down significantly. So isn't this really just a short-te

Once corporations have exhausted their large hoard of overseas cash, the amount they repatriate will go down significantly. So isn't this really just a short-term boost?

rdtsc 9y ago
The idea I think was to lower the corporate tax in general which will also give companies an incentive to stay and pay taxes here. Don't know how that will work long term. Maybe it will, until there would be another tax haven country advertising a better tax deal.
- adventured 9y ago
  Fortunately it's more elaborate than that. Ideally the US begins stealing corporations and manufacturing from the rest of the world, whereas previously the flow had been going the other direction, with dozens of large companies abandoning the US for lower tax locations. For example, the lower corporate tax rate, combined with very inexpensive US energy (cheap natural gas), makes manufacturing in the US even more appealing. You don't have to beat all the other tax havens, you just have to get low enough to be competitive on the overall value proposition. The UK is at or going down to 17.5%, that 3.5% variance with the new US rate becomes mostly meaningless as an issue (17.5% vs 35% however is a drastic gap).
gramstrong 9y ago
A short term domestic investment for a long-term tax benefit. The headlines made immediately after the new legislation is passed are what will stick with people the most. I'm not saying this is definitely the case, and I would love to be proven wrong. I just don't see how a tax cut would have corporations scrambling to return jobs to the U.S., instead of having both a tax cut AND cheap foreign labor.
downandout 9y ago
No. These types of investments don’t simply wash away - they go to building long term value for the corporations that make them, which creates good jobs, demand for housing, etc. Further, as long as this tax plan remains in place, corporations will continue to allow international profits to flow back into the US. Even if Trump is unseated in the next election, given the positive reaction among corporations to his tax plan, it may be politically impossible for the next Administration to return to punitive tax rates despite their predilection for them.
j4ship 9y ago
you are asking that question , but the answer is "who knows" ... your reasoning is apt , but its not a prediction of the future.
seanmcdirmid 9y ago
The USA has moved to a territorial tax system for corporations, so any income earned abroad will no longer be subject to US tax (only taxed by the country where the income was generated), and so can be freely moved back to the USA if the companies wish. There is no longer a distinction to be made concerning where money can be spent without being US taxed.
- vasilipupkin 9y ago
  There was little distinction before as companies could borrow against their overseas cash to invest in the US
  - seanmcdirmid 9y ago
    They would still have to pay those loans back out of their US income (or any income repatriated). Bankruptcy would be weird, in that case.

Once corporations have exhausted their large hoard of overseas cash, the amount they repatriate will go down significantly. So isn't this really just a short-term boost?

rdtsc 9y ago

The idea I think was to lower the corporate tax in general which will also give companies an incentive to stay and pay taxes here. Don't know how that will work long term. Maybe it will, until there would be another tax haven country advertising a better tax deal.

adventured 9y ago
Fortunately it's more elaborate than that. Ideally the US begins stealing corporations and manufacturing from the rest of the world, whereas previously the flow had been going the other direction, with dozens of large companies abandoning the US for lower tax locations. For example, the lower corporate tax rate, combined with very inexpensive US energy (cheap natural gas), makes manufacturing in the US even more appealing. You don't have to beat all the other tax havens, you just have to get low enough to be competitive on the overall value proposition. The UK is at or going down to 17.5%, that 3.5% variance with the new US rate becomes mostly meaningless as an issue (17.5% vs 35% however is a drastic gap).

gramstrong 9y ago

A short term domestic investment for a long-term tax benefit. The headlines made immediately after the new legislation is passed are what will stick with people the most. I'm not saying this is definitely the case, and I would love to be proven wrong. I just don't see how a tax cut would have corporations scrambling to return jobs to the U.S., instead of having both a tax cut AND cheap foreign labor.

downandout 9y ago

No. These types of investments don’t simply wash away - they go to building long term value for the corporations that make them, which creates good jobs, demand for housing, etc. Further, as long as this tax plan remains in place, corporations will continue to allow international profits to flow back into the US. Even if Trump is unseated in the next election, given the positive reaction among corporations to his tax plan, it may be politically impossible for the next Administration to return to punitive tax rates despite their predilection for them.

j4ship 9y ago

you are asking that question , but the answer is "who knows" ... your reasoning is apt , but its not a prediction of the future.

seanmcdirmid 9y ago

The USA has moved to a territorial tax system for corporations, so any income earned abroad will no longer be subject to US tax (only taxed by the country where the income was generated), and so can be freely moved back to the USA if the companies wish. There is no longer a distinction to be made concerning where money can be spent without being US taxed.

vasilipupkin 9y ago
There was little distinction before as companies could borrow against their overseas cash to invest in the US
- seanmcdirmid 9y ago
  They would still have to pay those loans back out of their US income (or any income repatriated). Bankruptcy would be weird, in that case.