Wednesday, September 07, 2011

A Reverse Tax Repatriation Holiday

Now and again, people (particularly large companies with vast foreign holdings) press Congress for a Tax Repatriation Holiday. The concept is, you bump the domestic money supply and generate some much needed inflation by encouraging companies to bring their earnings home. What better way to encourage them than by providing a tax break as an incentive?

Since companies are currently sitting on huge wads of cash, encouraging them to bring it home now might generate only larger wads of cash, with no attendant economic benefits and lower tax revenues to boot. So how about a reverse tax repatriation holiday? Instead of promising lower tax rates if they bring profits home now, promise higher tax rates for any profits brought home after a future date. Add a bit of stick in with the carrots. As a side benefit, a reverse tax reparation holiday would also provide more scope for future tax reparation holidays.


Blogger Yoel Natan said...

Lower taxes (or tax breaks) should definitely be tied to job creation and investment in America.

I'm glad they learned from 2004 that these tax holidays don't necessarily mean jobs in America. The tax holidays might become so regular that they'll invest even more outside of America figuring they'll bring the bacon home only once every five or ten years, whenever the next tax holiday comes.

Meanwhile, the Republican presidential candidate debaters continue to bring up the joke that companies are taxed at 35%. Ha! They never mention the "effective tax" rate that they really pay--only 16%--less than any other industrialized country in the world:

Google News: "effective tax" republican debate,or.r_gc.r_pw.&fp=dcbfb0cd9bd06a43&biw=1110&bih=829

11:19 PM  

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