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Old 12-07-2017, 04:32 AM
 
Location: Los Angeles
2,432 posts, read 1,326,154 times
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One target in the GOP tax bill is an estimated $2.6 trillion in U.S. corporate profits that are stockpiled offshore, with lawmakers arguing their bill will encourage those gains to return stateside.

The plan offers a lower tax rate for repatriated profits, which lawmakers say will encourage corporations to bring profits* back to the U.S., giving the economy a healthy boost as those companies put their newly available cash to work.

The problem is a similar "tax holiday" on overseas profits generated little economic boost in 2004. The American Jobs Creation Act (2004) temporarily cut taxes on repatriated profits to 5.25 percent from 35 percent. About 9,700 companies took advantage of the tax break, bringing back $312 billion.

A 2011 Congressional Research Service report found that the tax holiday, "did not increase domestic investment or employment." Instead of expanding operations or hiring, companies tended to use the money to buy back shares of their own stock, purchases that disproportionately benefit wealthy investors, who are less likely to spend any extra income.

https://fas.org/sgp/crs/misc/R40178.pdf

The experience from the 2004 tax bill suggests that most of this money will be distributed to shareholders, not invested in U.S. business assets.

https://www.youtube.com/watch?v=3bukpKpfiaU

Not to mention that the CURRENT economic circumstances for investment are already high:

1) Interest rates are low, retained earnings are high and credit is available.

2) Most firms thus do not need the repatriated money to fund worthwhile business investments in the U.S.

Last edited by Astral_Weeks; 12-07-2017 at 04:50 AM..
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Old 12-07-2017, 04:57 AM
 
2,240 posts, read 1,386,969 times
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Except, unlike last time, the repatriation is mandatory. All accumulated foreign earnings and profit will be hit with a 1 time tax and then future earnings and profit won’t be forced to be held overseas. It’s a shift away from a worldwide system to territorial.

So, there’s very little “similarity” to the 2004 holiday. This one is not a choice. You’re going to be taxed in the u.s on this money that was already taxed internationally whether you bring it home or not.

And even if there arent investment opportunities directly in U.s assets for the company, if the money is distributed to U.S shareholders as you suggest, the money will be spent and invested in the U.s. by them. Even if the “rich” don’t spend it, it’s being invested unless they’re planning on burying it in the ground.

Last edited by Thatsright19; 12-07-2017 at 05:10 AM..
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Old 12-08-2017, 07:25 PM
 
Location: Montgomery County, PA
13,642 posts, read 8,659,415 times
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At a time when money moves around with a click of a mouse, what does it matter where the money is? Do you even know. I am not even sure it is real money. It's just numbers in a spreadsheet.
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Old 12-08-2017, 07:32 PM
 
9,086 posts, read 3,701,709 times
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Quote:
Originally Posted by HappyRider View Post
At a time when money moves around with a click of a mouse, what does it matter where the money is? Do you even know. I am not even sure it is real money. It's just numbers in a spreadsheet.
free free to send me some numbers on a spreadsheet then
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Old 12-08-2017, 07:51 PM
 
Location: Texas
5,774 posts, read 6,654,446 times
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Quote:
Originally Posted by Thatsright19 View Post
Except, unlike last time, the repatriation is mandatory. All accumulated foreign earnings and profit will be hit with a 1 time tax and then future earnings and profit won’t be forced to be held overseas. It’s a shift away from a worldwide system to territorial.

So, there’s very little “similarity” to the 2004 holiday. This one is not a choice. You’re going to be taxed in the u.s on this money that was already taxed internationally whether you bring it home or not.

And even if there arent investment opportunities directly in U.s assets for the company, if the money is distributed to U.S shareholders as you suggest, the money will be spent and invested in the U.s. by them. Even if the “rich” don’t spend it, it’s being invested unless they’re planning on burying it in the ground.
They will be assessed a 1x tax, however they have 8 years to pay it, and can do it in installments. They also will have two tiers for illiquid(5%) and liquid (12% - cash equivalents). Thus giving a chance for arbitrage and continuing to harbor assets overseas, as they have already paid the tax on it and can then move it at any time.

Also, they are not required to distribute funds, they can as they have earlier do share buy-backs, increase pay-outs to officers and other highly compensated employees as the labor market tightens. Restructure debt while the financing terms are still favorable & make money on interest, versus paying it out to investors and employees.

There is not one shred of evidence that companies outside of the need to improve due to competition, will do so.
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Old 12-08-2017, 10:16 PM
 
Location: 5,400 feet
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It's just horrible that corporations would consider passing along tax savings to their owners.
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Old 12-09-2017, 08:47 AM
 
29,462 posts, read 33,699,747 times
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Quote:
Originally Posted by jiminnm View Post
It's just horrible that corporations would consider passing along tax savings to their owners.
I think people are hearing what they want to hear and not what is being said and implied. Repatriating money will increase the annual income for many. As you note it will be in capital gains/dividends and not wages.
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Old 12-09-2017, 09:36 AM
 
2,240 posts, read 1,386,969 times
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Quote:
Originally Posted by txgolfer130 View Post
They will be assessed a 1x tax, however they have 8 years to pay it, and can do it in installments. They also will have two tiers for illiquid(5%) and liquid (12% - cash equivalents). Thus giving a chance for arbitrage and continuing to harbor assets overseas, as they have already paid the tax on it and can then move it at any time.

Also, they are not required to distribute funds, they can as they have earlier do share buy-backs, increase pay-outs to officers and other highly compensated employees as the labor market tightens. Restructure debt while the financing terms are still favorable & make money on interest, versus paying it out to investors and employees.

There is not one shred of evidence that companies outside of the need to improve due to competition, will do so.
The final bill is going to be closer to 7.5% and 14.5% in the different pools, and there’s no chance to “move it around” since you have to pay the HIGHER balance between the end of the year....and the day before the plan was announced. There’s also a look back period to get average balances from the past.

And so what if there’s an 8 year installment? The u.s is taxing money that was already taxed internationally in a switch from world wide taxation to territorial.

As far as the rest of your post, the money is the corporations to spend to maximize the shareholder wealth. They will do what they see fit for their owners.
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Old 12-09-2017, 06:40 PM
 
2,232 posts, read 4,376,864 times
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I would say what bothers me most about any tax reform or so called "tax cut" is that its only for the rich. Well, first we have to define what "rich" is. And second, well, people who pay taxes are the only ones who can get tax cuts. If you are paying $6,000 in taxes but getting $10,000 in tax benefits, then why would you get a tax cut.
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Old 12-10-2017, 01:58 AM
 
Location: Texas
5,774 posts, read 6,654,446 times
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Quote:
Originally Posted by Thatsright19 View Post
The final bill is going to be closer to 7.5% and 14.5% in the different pools, and there’s no chance to “move it around” since you have to pay the HIGHER balance between the end of the year....and the day before the plan was announced. There’s also a look back period to get average balances from the past.

And so what if there’s an 8 year installment? The u.s is taxing money that was already taxed internationally in a switch from world wide taxation to territorial.

As far as the rest of your post, the money is the corporations to spend to maximize the shareholder wealth. They will do what they see fit for their owners.
I agree the numbers may be higher, but have not seen anything out of committee & the 5 & 12 are actual published. And you won't have to pay the higher balance, you can pay the balance in installments through an 8 year period, so the full amount will not be coming back immediately and will be taxed the FIRST time in the parent company HQ.

They are for sure going to maximize the corporations position, share buybacks & debt refinancing will long term benefit the company, but does nothing for shareholders or employee, thus the "boost' to the economy fails, which in this exercise was the guise for giving the corporations the tax relief and the repatriation exception.
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