3 Reasons Why the U.S. Should Not Allow Corporations to Repatriate Profits at a Discount Rate

I make no claim to be an economic wizard…but then again, given how poorly most mainstream economists are doing, could I be much worse? That post was from 2009 and things have not improved. Seemingly obvious things are seemingly obscure to the average economics Ph.D. – in fact, one might say they are being wilfully blind.

There are three (3) blindingly obvious, common sense reasons why the U.S. would be very foolish to allow corporations to repatriate profits at a bargain basement tax rate. At least, they seem quite obvious to me, but if someone more knowledgeable than I would correct me, I’m all ears (and a fair bit of forehead these days, too).

[The idea is that U.S. corporations could bring home foreign profits and pay 8.5% - or less - versus the 35% they would normally pay.]

1. Last time, they just spent it on themselves. That is, the last time this was tried, corporations used the money to buy back their own shares and reward their CEOs with fat bonuses. There are lots of (extremely rich) people claiming “This time will be different, really,” but…fool me once and all that.
2. Corporations already have very large cash reserves and are not spending. And why would they, if there’s no demand for their product? Give them more, and why would they spend that?
3. It creates a perverse incentive to outsource jobs, because the tax rate on foreign profits would be so much lower than on U.S. profits. Allowing these corporations to ‘bring home’ the profits merely encourages them to send more jobs overseas.