Saturday, September 22, 2018
The Hill op-ed: Tax Reform Promised a Deluge, Delivered a Drip of Foreign Earnings, by Omri Marian (UC-Irvine):
One of the main pitches Republicans made in support of last year’s tax overhaul was that it will encourage U.S. multinationals to repatriate their massive piles of foreign profits.
The new law is “going to free up a lot of money to come back and build factories here and so on," White House Council of Economic Advisers Chairman Kevin Hassett said shortly before passage of the law.
Last month, President Trump said, “[We] think it’s going to be close to $5 trillion. Over $4 [trillion], but close to $5 trillion, will be brought back into our country."
Nine months after the passage of the law, these promises have failed to materialize. A report by the Wall Street Journal found that the rate of repatriations proved sluggish.
Moreover, there is ample evidence that the money that is being brought back is used primarily to reward shareholders through dividends and stock buybacks and is not invested in “factories … and so on."
Surprising? Not really. In fact, this is exactly what most tax experts expected would happen. ...
Congress simply left money on the table (for shareholders to grab). Not only that, by taxing such earnings at preferred rates, Congress effectively rewarded past tax planning by U.S. companies, with no upside for the government. What kind of a message does that send?