Organization Promotes Report on Benefits of Repatriation of Foreign Earnings
Organization Promotes Report on Benefits of Repatriation of Foreign Earnings
- Institutional AuthorsAmerican Council for Capital Formation
- Cross-ReferenceFor the full report, see Doc 2008-27140
. - Subject Area/Tax Topics
- Jurisdictions
- LanguageEnglish
- Tax Analysts Document NumberDoc 2008-27141
- Tax Analysts Electronic Citation2008 TNT 249-27
Report shows how Congress can ease the liquidity/credit crises and
stimulate the economy without adding to the deficit --
"'win-win' for all . . ."
THE PROBLEM: The U.S. economy is entering the second year of a deepening recession -- a downward spiral fueled in part by severe limits on liquidity and credit constraints. Consumers are overextended. Businesses large and small desperately need cash to survive but access to capital and credit is either non-existent or prohibitively expensive. The quest for cash is a big reason why the Federal Reserve is preparing to inject several trillions into the U.S. economy and Congress is considering a taxpayer-funded stimulus bill that could be as high as $1 trillion.
THE PROPOSAL: Many successful U.S.-based companies have generated substantial earnings that could be invested in restoring the U.S. economy at virtually no cost to the federal government. However these earnings are trapped overseas due to U.S. tax laws that many foreign competitors do not face. Congress should consider, as part of economic stimulus, legislation similar to a bipartisan 2004 law that enabled U.S. businesses to invest $360 billion of their foreign earnings in the U.S. at a temporary, reduced tax rate of 5.25%.
THE BENEFITS: In a new study conducted for the American Council for Capital Formation, Dr. Allen Sinai of Decision Economics, Inc., analyzed the economic benefits that would occur if Congress enacted legislation similar to the 2004 American Jobs Creation Act (AJCA).1 Based on an estimated $545 billion of repatriations, Dr. Sinai's quantitative study concludes:
Increased U.S. GDP, peaking at an additional $110 billion in 2010
Reduction in outstanding debt, which would improve credit availability
A cumulative increase in U.S. investment of $280 billion in plant & equipment over the next 5 years
Increased U.S. R&D spending by approximately $7 billion per year over the next five years
Job generation within the U.S. economy peaking at 614,000 in 2011
Nearly $140 billion in federal tax revenue over five years from initial cash investment and residual economic activity
THE RECORD -- IT WORKS: The 2004 AJCA incentivized U.S. companies to transfer $360 billion in foreign earnings to the U.S. A survey of U.S. companies that utilized the 2004 law found, on average, the following: 25% of repatriated funds were used for U.S. capital investment, 23% for hiring and training of U.S. employees, 14% for U.S.-based R&D and 13% for U.S. debt reduction.2
Bureau of Labor Statistics data indicates that, after the enactment of the AJCA, the U.S. experienced significant payroll growth that greatly exceeded such growth prior to enactment. Further, COMPUSTAT analysis of companies that utilized the 2004 law reveals that these companies increased employment and R&D by a greater percentage following enactment than did all other publicly-traded U.S. corporations, with employment increasing by 9.6% over 2004-2006 compared to 9.0% for all other companies. R&D spending increased by 28.4% over the same period compared to 22% for all other publicly-traded U.S. corporations.
FOOTNOTES
1 The full Sinai report can be found at www.accf.org
2 Graham/Hanlon/Shevlin, "Barriers to Mobility" (2008). Report can be found at www.accf.org
END OF FOOTNOTES
- Institutional AuthorsAmerican Council for Capital Formation
- Cross-ReferenceFor the full report, see Doc 2008-27140 .
- Subject Area/Tax Topics
- Jurisdictions
- LanguageEnglish
- Tax Analysts Document NumberDoc 2008-27141
- Tax Analysts Electronic Citation2008 TNT 249-27
