Paul L. Caron

Tuesday, March 21, 2006

ASA Releases Repatriated Earnings Explode After Tax Cut

The American Shareholders Association has released a report, $217 Billion Repatriated Back to America in 2005; Additional $100 Billion Ready to Come Over in 2006. The report states that corporations have taken advantage of the new favorable tax rate applicable to repatriation of foreign profits to the United States to return $217 billion of foreign profits in 2005, with an additional $100 billion to be repatriated in 2006. These amounts are far in excess of the amounts predicted by the Joint Committee on Taxation prior to the passage of the American Jobs Creation Act of 2004:


Here are some of the study's "key points":

  • The Invest in USA Act lowered the tax rate on repatriated profits to a flat rate of 5.25% for one year.
  • International Strategy and Investment Group (ISI) research finds 350 companies announced $290 billion of repatriations to date.
  • In response to lower tax rates, foreign subsidiaries increased their repatriations six fold from $36 billion in 2004 to $217 billion in 2005.
  • Due to the surge in repatriations, companies are flush with cash, which is being used for capital investment, job creation, M&A activity, dividends, and share repurchases.
  • The U.S. government will receive $17 billion of corporate tax revenue collections in addition to the less quantifiable, indirect impact of higher income, payroll, and corporate tax collections.

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