One of Trump’s better ideas, at least ostensibly, is to give corporations with huge cash hordes overseas a “tax holiday” of sorts if they will repatriate that cash. Estimates are that some $200 billion may return to our shores. Depending on your political ideology, there are different ways of looking at this tax avoidance practice. It’s perfectly legal, and on the one hand it’s a smart business decision to legally avoid paying taxes. On the other hand, these are companies that have taken advantage of what this country has to offer to build their successful businesses – and for them to refuse to pay something back to this country to help pay for needed infrastructure, a decent public education system, e.g., seems patently unfair. We know which view always wins out.
Much less justifiable – one might say egregious – is using tax havens abroad to avoid taxes on money earned here . Congress has obligingly created a loophole that allows these big multinational companies to play by a different set of tax rules than smaller, domestic businesses, allowing them shelter some $90 billion of income in subsidiaries that are for the most part nothing more than a post office box in the Caymans. A report by Citizens for Tax Justice says that 358 U.S. companies have set up some 7,622 ”subsidiaries” in tax havens in places like Bermuda and the infamous Cayman Islands. That report is available here: http://ctj.org/ctjreports/2015/10/offshore_shell_games_2015.php#.WH-3qBsrKUk
How much of this tax avoidance is illegal? No one knows, because there is no accountability for this hidden cash. Who ends up paying the price for this? U.S. taxpayers – you and I – of course. Doubly so if the Republicans use the deficit as a pretext for cutting back on the safety net. A shame we just can’t raise enough cash for campaign contributions to make these politicians pay attention to us.
So Trump’s desire to repatriate some of this money, assuming a Republican Congress will allow it, seems like a pretty good deal. The taxes (dropped to around 10%) might be used to pay for some needed investments here at home, and one could argue that the remaining 90% could be used to invest in these companies themselves, perhaps creating good jobs.
Well, we’ve been here before, in 2004, so don’t get too excited. Going by what happened back then, it’s estimated that $150 billon of that estimated $200 billion will go to buy back shares, and the rest to pay dividends and for mergers and acquisitions. If you are a shareholder you will benefit, but there the trickle down stops.