President Trump says multinational corporations have stashed $4 trillion (instead of the commonly mentioned $2.7 trillion) offshore, untaxed. Here are three reasons — Politics, Practicality, and Politics — why all that income should be “deemed repatriated,” that is, taxed immediately.
Politics: The political case is here – the big beneficiaries of repatriation amnesty opposed Trump. http://thehill.com/blogs/pundits-blog/economy-budget/317227-big-business-is-holding-us-jobs-hostage-trump-should-not.
Practicality: A one-time revenue pickup accelerates into the 10-year revenue window some tax that would have been outside the window. This is easy money. And there’s lots of it. The commonly mentioned $2.7 trillion (as opposed to Trump’s $4 trillion), if fully taxed, would bring in some $720 billion in revenue. The multinational corporations are getting away with murder in the future if they get something like territoriality (which solves none of the problem that lines between foreign and U.S. income are fuzzy – leaving huge tax avoidance possibilities). They can pay up front for that big giveaway. The GOP in Congress is desperate for revenue in this tax reform effort. Almost every other revenue source nudges against something that somebody really likes.
Policy: Harvard Professor (and my friend and fellow government worker in the 1986 Tax Reform Act) Steve Shay (and co-authors Fleming and Peroni) make the policy case for full, immediate taxation of income taxed offshore at the 35 percent rate in great detail here. https://dash.harvard.edu/bitstream/handle/1/31958204/155tn0069-Fleming.pdf?sequence=1. No unwanted disincentive arises from immediate taxation – the income has already been earned. Immediate taxation lets it come home anytime.
I’m for that 35 percent rate. Taxing at the new corporate rate, say 20 percent, is a tenable middle ground.