Swamp chomp
Tax bill skips job-creation gold mine
ONE part of the Republican tax bill that could help the economy tremendously probably isn’t going to do so. Instead, it is going to be a tremendous gift to the shareholders of certain companies, courtesy of American taxpayers.
The part I’m talking about has to do with the repatriation of profits held overseas by US companies. I’ve talked about this — as have President Trump, billionaire investor Carl Icahn and a lot of other people caught up in the tax debate.
I said years ago that allowing companies to bring back to the US profits they made abroad — and had avoided paying the 35 percent US tax on — was a tremendous way to help the economy.
But that would only be so if there was a condition these companies must accept before they repatriate the estimated $2.5 trillion stashed overseas. They should be required — required! — to use a certain percentage of the repatriated funds for expansion and job creation. That seems fair enough. The US will be allowing these companies to pay only 10 percent and not the 35 percent they should have forked over. So these companies should give something back.
What are we, schnooks? Why wouldn’t we require that, at the very least, companies like Apple — which is said to have $268.9 billion in profits outside the country — create 10,000 new jobs in the US?
The lower tax rate for repatriated profits should be in the tax bill that Congress will vote on this week. The restrictions on how the repatriated money needs to be employed won’t be.
And history shows that the executives of those blessed companies will use most of their bounty to reward themselves in the form of special dividends and stock buybacks, which will raise their companies’ share prices.
Good deal for stockholders. A kick in the pants for the American taxpayer.
And all Congress had to do was learn from past mistakes and tweak the bill just a little. Companies probably would have figured a way around any job-creation requirement — but at least make the effort.
Congress had a reason to go easy on these un-repatriated assets. The 10 percent revenue boost on $2.5 trillion would add $250 billion to the US Treasury. And that will help keep down the amount the US deficit will increase over the next 10 years — at least on paper — because of the tax bill.
The larger the projected deficit increase from the tax proposal, the less chance it had to pass. So Congress may not have had a choice but to go soft on the repatriated profits.
History tells us what corporate executives are going to do with most of the $500 billion they’ll get from the lowering of the tax rate on repatriated profits to 10 percent.
In 2004, there was a simi- lar deal made with companies that had a lot of money overseas. As part of the American Jobs Creation Act, companies could bring home those profits and pay only a 5.25 percent tax rate. There was a jobs provision in that law — but companies deftly worked around it. More than $312 billion was repatriated. According to research put out by Factset Insight, the amount of special dividends paid to shareholders of S&P 500 companies rose from $30.3 billion in 2003 to nearly $180 billion in 2004 — a 492 percent gain.
Stock buybacks? They went from $115 billion in 2003 to $202 billion in 2004 to $336 billion in 2005, according to FactSet Insight.
I’d say that Trump, Speaker Paul Ryan and Senate Majority Leader
Mitch McConnell are replicating the same mistake — only worse.
They are not even making an effort to create jobs, and are making US taxpayers the suckers, again.
The swamp? It’s doing just fine. As putrid as ever.