Wednesday, October 20, 2010

Sustainable US Stimulus on the Cheap

The CEO of Cisco and President of Oracle present an interesting solution developmentin a WSJ OpEd:

One trillion dollars is roughly the amount of earnings that American companies have in their foreign operations—and that they could repatriate to the United States. That money, in turn, could be invested in U.S. jobs, capital assets, research and development, and more.

But for U.S companies such repatriation of earnings carries a significant penalty: a federal tax of up to 35%. This means that U.S. companies can, without significant consequence, use their foreign earnings to invest in any country in the world—except here. [...]

By permitting companies to repatriate foreign earnings at a low tax rate—say, 5%—Congress and the president could create a privately funded stimulus of up to a trillion dollars. They could also raise up to $50 billion in federal tax revenue. That's money the economy would not otherwise receive.
The upside is that the investments made by these companies would almost certainly be invested more efficiently and on more sustainable businesses than the US government spends. The downside, is exposure to the demagoguery of activists who decry supposed tax breaks for the rich and corporations. More cynically, what Chambers and Katz haven't quite considered, is that if it's companies who invest and repatriate money then politicians no longer have the control - and to date, that's seemed to be an influential consideration in stimulus spending. If only we lived in a more rational world...

No comments: