Rising oil prices & unemployment rates, faltering manufacturing production, and spikes in inflation ($ devaluation) weren't defended with hopes of a turnaround in the U.S. economy by Fed Chief Ben Bernanke yesterday as he concluded "monetary policy cannot be a panacea." The Fed Chief hopes gas prices will ease, but until employment data improves we "cannot consider the recovery to be truly established."
The Federal Reserve, in other words, is out of time, money and ideas for fixing the economy in the foreseeable future. The Fed is relying on hope. Hope that hiring picks up, the consumer re-emerges, and U.S. economic growth rises above 3 percent by the end of the year
Hope? It's time to take time tested action... the Quantitative Easing program has not worked. I say, bring back the corporate tax repatriation benefits.
U.S. Businesses currently hold approximately $1.7 Trillion dollars over seas and won't bring it back to infuse into the U.S. economy because our corporate statutory tax is among the highest in the world at 35%. Allowing corporate businesses to bring their overseas cash back to the U.S. is a time tested, effective method of infusing capital into the economy.
• It will bolster the marketplace, allowing businesses to deliver shareholder value via share repurchases and dividend issuances.
• Create Jobs, putting an end to corporate hiring freezes
• Fund R&D activity, keeping the US progressive in Science, Engineering, healthcare, etc...
• Spur GDP growth as consumer prices fall, credit decreases, and spending picks up...
The following CNN Money article gives a bipartisan, logical explanation:
http://finance.fortune.cnn.com/2011/04/29/bring-on-the-corporate-tax-holiday/
• Create Jobs, putting an end to corporate hiring freezes
• Fund R&D activity, keeping the US progressive in Science, Engineering, healthcare, etc...
• Spur GDP growth as consumer prices fall, credit decreases, and spending picks up...
The following CNN Money article gives a bipartisan, logical explanation:
http://finance.fortune.cnn.com/2011/04/29/bring-on-the-corporate-tax-holiday/
Stop printing money, devaluing the dollar, and giving capital injections to the banks that brought us to our knees in the first place.
As always, I'd love to hear your feedback and thanks for reading.
The SVTB
It's an interesting topic. I agree there are potential benefits but there's also risk/cost associated with legislation that would repeal repatriation tax. The potential opportunities should be explored but I'd rather see comprehensive tax reform. Tax reform that doesn't allow companies like GE to push tax burden onto everyone else.
ReplyDeleteRepealing the tax would cost the government billions of dollars in forgone revenues causing the government to borrow even more money from foreign lenders.
There isn't evidence that allowing the repeal will create jobs. In 2004, the money was largely used by companies to pay for dividends and stock buybacks. After HP brought back 14.5 billion in 2004, they laid off 14,500 employees in 2005.
"our corporate statutory tax is among the highest in the world at 35%"
This is true but it's relevance is blown out of proportion. Statutory tax only applies to the last dollar earned. The effective tax rate is substantially lower even for the richest taxpayers and largest corporations because of tax exclusions, deductions, credits and the 15 percent top rate on dividends and capital gains. US corporate taxes as a percentage of GDP are actually the lowest of all OECD countries.
You're talking about the average effective tax rate which is based on Gross $ of C corporations, not net profit relative to GDP (Marginal Effective Tax Rate) which is a more accurate measure as the C corporation CM to the tax base has declined:
ReplyDelete•The U.S. has a low average effective corporate rate when measured incorrectly as a share of GDP.The low rate results from the relative decline in C corporation business activity, the high U.S. statutory rate driving profits offshore, and the high U.S. marginal effective rate suppressing real investment.
•The U.S. has one of the highest statutory corporate tax rates in the world. The high statutory rate drives reported income offshore, and it is also an important component of the marginal effective tax rate faced by companies.
•The U.S. has one of the highest marginal effective corporate tax rates in the world according to some calculations, which likely reduces U.S. capital investment substantially. After all, “corporate taxes are the most harmful type of tax for economic growth,” according to the OECD.
http://www.cato-at-liberty.org/are-u-s-corporate-taxes-low/
Furthermore, unemployment dropped a full point 2005-2007 as a direct result of the repatriation stimulus. GDP also grew > 4% Consumer spending increased, and the markets stabilized.
Comprehensive tax reform on an already top heavy tax system which double and triple taxes it's top 15% will drive away entrepeneurship, freeze consumer spending, and deincentivize the nature desire to achieve wealth (success) in the US.
A mere $30B incremental expense to support this initiative is small relative to what's already been spent on QE programs.