Free Markets, Free People

Repatriating corporate profits with tax breaks

It’s under consideration, and if you read the article, the NYT isn’t particularly thrilled about it.

Why?  Because those nasty corporations didn’t create jobs the last time this was done:

But that’s not how it worked last time. Congress and the Bush administration offered companies a similar tax incentive, in 2005, in hopes of spurring domestic hiring and investment, and 800 took advantage.

Though the tax break lured them into bringing $312 billion back to the United States, 92 percent of that money was returned to shareholders in the form of dividends and stock buybacks, according to a study by the nonpartisan National Bureau of Economic Research.

This money comes from overseas operations and in some cases accounting maneuvers that shift domestic profits to low-tax countries. The study concluded that the program “did not increase domestic investment, employment or research and development.”

My question is, it didn’t increase “domestic investment, employment or research and development” where?  Because unless the stockholders took their money and buried it in a coffee can in the back yard, that’s most likely exactly where it went – via a more circuitous route that the NBER didn’t bother to follow.  That money didn’t just disappear when it went to share holders.  Where did it go?

Well, first remember that share holders are what?  Investors.   So even if all they did was let that money ride, it was “invested”. 

If, in fact, it was invested elsewhere, then one would assume that those companies in which the investment was made may have increased employment or R &D.  But you have to chase the money to find that out.

Bottom line, repatriation of overseas profits means more tax revenues, even at the reduced rate that would be found in a “holiday” as is being proposed.   And even if shareholders get the lion’s share of the money (and that’s why they’re called “shareholders” NYT, because they own a share of that money), they’re going to spend it, save it or invest it themselves.  

If one could get past the first step in the process and look at how money usually flows and is used, they’d realize that whining about “shareholders” getting most of the money is about as ignorant as complaining that if government gives taxpayers a tax break we wouldn’t spend the money properly, ala Bill Clinton.

Injecting billions of dollars of private money into the private economy in times like this isn’t going to hurt anything.  But it stands a great chance of helping.   But hey, those damn corporations wouldn’t spend it the way the NYT thinks they should, so they’re against it.


Twitter: @McQandO


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29 Responses to Repatriating corporate profits with tax breaks

  • The Scrooge McDuck idiot leftist view of what “rich” bastards do with their money. Put it in a personal vault and swim in it, never letting it be used. That is how they remain rich, by collecting paper with numbers printed on it and taking it out of circulation. That is why you never see rich people with mansions, supercars, private jets, servants, etc because they never use the money! Kind of pointless trying to become rich isn’t it?

    Which is why of course the Fed always has to inject more money into the system. Rich people who don’t spend the money are always reducing the money supply.

    Seriously, this seems to be how most leftists view the upper reaches of the economy.

    • The personal vault and heavy-duty gold coin filled swimming pool don’t come cheap, either.
      Think of the skilled tradesmen who have to install that for Scrooge McDuck.

  • The capital is out there, but it’s not going to be released into jobs creation until the REGULATORY monster (i.e., banking, Obama/RomneyCare, EPA,C&T) is slain.
    That monster “Need’s killin'”.

    • Yes, and in the meantime, investors put their money into emerging markets where the growth is.
      I will say that if it was the case that repatriated profits were sent to shareholders, and then those shareholders promptly bought Mathews China Fund or whatever, then technically, the repatriation could lead to little investment at home.

  • Hey just because you earned it, doesn’t mean it’s your money, it goes to the pig that squeals the loudest.

  • Simply giving the top 2% another windfall – and let’s not kid ourselves that’s what we’d be doing if we allowed these companies to repatriate the money and then give it away in dividends and stock buy backs – only increases concentration of wealth in even fewer hands. We’ve been doing that for 30 years now and all it’s done is promote Wall St bubbles and speculation in commodities that are a drag on the economy. It’s not only time the rich started paying their fair share for moral reasons, in practical terms they can’t and won’t spend enough of their wealth on consumer goods and services to get the economy moving again. 70% of American GDP is based on consumer spending. If supply side economics ever had any validity it’s outlived it’s usefulness. Our problem these days isn’t too little money in the hands of corporations and top wage earners, At the end of 2010 corporations were siting on $2 trillion dollars in profits. The problem is too little demand, too few of the other 98% of us have money to spend. Why is that? Because we’ve outsourced jobs and skewed government policies to favor the rich. Once Wall St realized the middle class was tapped out of discretionary income they started going after the necessities that people have to consume. Speculation in oil and food and the housing fiasco that has cut 35% off the value of our homes, the single largest part of most family nest eggs. That’s unsustainable. We need a lot more good paying jobs in this country. Until we have them the economy won’t recover.

    • Could you have crammed another idiot cliche into that post?
      Robert Heinlein once wrote:

      Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded — here and there, now and then — are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right-thinking people. Whenever this tiny minority is kept from creating, or (as sometimes happens) is driven out of a society, the people then slip back into abject poverty.
      This is known as “bad luck.”

    • “Simply giving the top 2% another windfall – and let’s not kid ourselves that’s what we’d be doing if we allowed these companies to repatriate the money and then give it away in dividends and stock buy backs”

      Wow. I didn’t know I was in the top 2%. I sure could use some of those increased dividends, though. Our retirement investments (that must be what puts me in the top 2%!) have not payed off as well as expected over the last couple of years.  

      By the way, just how much is a “fair share” for the rich to pay?


      • I can’t even recall how many decades ago it was, but Peter Drucker pointed out that American capitalism had done without a word what Marx and Lenin wanted to do at the point of a gun–the working people of the nation owned the capital.
        Most publicly held companies are owned by “little people” via their pension funds and other investment vehicles.

  • If 315 billion came back in, then $50 Billion in capital gains taxes where paid out by stockholders who received dividends or had their stock bought back. (It’s 15% for long term capital gains, ain’t it?)

  • This is AMAZING…!!!
    We are treated to “velocity” arguments WRT Federal spending…which transmits some fraction of money in to actual money out…which SUPPOSED to be really, really stimulative.  Regardless of how STOOOOOOOOOoooooooooooooooooooooopid the spending target.
    But they give NO stimulative effect to money…dollar in/dollar out…LEFT with its owners?  People who have EMPIRICALLY shown they can pick winning, productive, profitable enterprise???

  • It’s the STOOOOOOOOOOOOOOOOOOOOOOOOOOooooooooooooooooopid, economy…!!!
    Oh, goodie…
    Next week, Clinton’s organization, the Clinton Global Initiative, will turn its attention to the U.S. for the first time, unveiling a blueprint for job creation.
    One big idea—paint roofs white.
    Cripes squared…

    • Guaranteed to increase sun-glass sales, which will cause more people to be employed at sun-glass kiosks in malls, and more drivers delivering sun-glasses and the displays to 7-11’s, Quiktrips and RaceTraks through out the states, and more paint sailes, more brush sales, more contractors painting roofs, more gas sold to get them there…you see?  GENIUS!!!! GENIUS!!!!!
      Then we can have government inspectors go around and cite people who have failed to paint their roof white, it’s genius!
      We can probably even start a racial issue by implying that black roofing isn’t as good or desirable as white roofing…boy, the economic opportunities here, all from a simple idea, are practically limitless!

  • I remember the mockery when Stephen Chu proposed this. It’s actually a good idea. Of course in 5 to 10 years we should be able to paint our houses with paint that will help generate electricity.

    • Are Erb’s students getting credit for coming by and repeating nonsense they picked up in their classes on non-science?

    • IFFFFFF it were a “good idea”, people would be doing it.
      How ’bout you?  Is mommy’s house entirely white, including the roof?

  • [T]he tax break lured them into bringing $312 billion back to the United States, 92 percent of that money was returned to shareholders in the form of dividends and stock buybacks…

    The horror!  The OUTRAGE!  Imagine: profits going to the shareholders who have a rightful claim on them!  The very idea…


    Unfortunately, the left seems increasingly wedded to the idea that money – somehow – belongs to people who have done absolutely nothing to earn it except tell a sob story, be politically connected, or both.

    SharpshooterThe capital is out there, but it’s not going to be released into jobs creation until the REGULATORY monster (i.e., banking, Obama/RomneyCare, EPA,C&T) is slain.

    I believe the many businessmen have told this bluntly and clearly to Captain Bullsh*t and his hooligan advisors, but to no avail.  Quite aside from the fact that dem leaders appear to look upon regulation as a political tool to repay friends, punish enemies, and extort campaign funds from all, the left seems to have the idea that those nasty ol’ capitalists want to be completely rid of all regulation for the purposes of selling unsafe products to their customers, polluting the environment, endangering their employees, and otherwise wrecking the whole world for everybody, all in the interests of piling more money into their already-overflowing vaults.

    You know, for people who profess to believe that the sole purpose of a business is to create jobs for people, the left seems hell-bent on making it as hard as possible.

    • As Daley, DaWon’s CofStaff said the other day to a group of business leaders; “There is no defending the indefensible”.

    • It’s only hard if there’s that profit motive thingie involved.  if people would just do what they ought to, and hire people, and provide jobs and not expect to make a profit in doing so, there’d be all kinds of jobs created.
      I’m trying to decide if I should sarc bracket that, because somewhere in the White House, there’s a person, probably persons,  who can’t articulate that thought process, but it IS what they are thinking.

  • Companies do not exist to hire people. They exist to pool together capital to create the goods or services that customers are willing to buy. They will hire enough labor and employ enough capital to do so profitably. They will not hire someone who cannot generate enough incremental revenue to cover his costs as well as make some extra for profit. It’s really very simple.

  • Let me see if I’ve got this straight.  $312 billion is back in America … yet this is a bad thing?

  • So what if I bury my money in a coffee can in the back yard?  Or store it in a silo, ala Scrooge McDuck?  If it’s my money, shouldn’t I be able to do as I wish with it?  Maybe I’ll wallpaper the kitchen with small green pictures of US Grant.  The idea that the economy must be protected from individual decisions by government tax policy is preposterous.

    • Two words…


      That fancy creation of make believe is what gives “them” the right to dictate what all wealth should be used for.