Thursday, November 11, 2010

Another Article About Repatriating Profits and Why It's Won't Happen with the Current Tax System

I just found an article posted on WSJ.com on October 20, 2010 that concurs what I posted on October 12, 2010 regarding

On October 12, 2010, I posted an article on repatriated profits (or lack thereof) on how billions of dollars of U.S. companies’ profits generated overseas are not brought back to the U.S. due to corporate income tax implications. Since then, an article was posted on WSJ.com that says that up to a trillion dollars are “waiting to be repatriated if tax policy is right.” The hurdle though is the federal tax rate up to 35%.

The article was authored by Cisco Chairman and CEO John Chambers and Oracle President Safra Catz. Why would these two business leaders take the time to write an article about repatriated profits? Probably, it is because their companies are both among those that want to repatriate overseas profits.

The article suggests a tax rate of 5% on repatriated profits; however, that rate might still be a hinderance because repatriated profits may still also be subject to state income taxes. What if the U.S. adopted the FairTax? The FairTax would not impose any tax on repatriated profits, which would mean that such profits would only be subject to state income taxes. That would make repatriating profits more enticing. Furthermore, if states also adopt the FairTax, then repatriated profits may not be subject to any taxes. That would really make repatriating profits enticing.

Chambers and Catz wrote that repatriating cash could create a stimulus package larger than the entire federal stimulus package, and none of the funds would be public/taxpayer money. The stimulus could be used to investing in research, building plants, purchasing equipment, and more. All of these uses create jobs.

It sure would be nice to bring that money to the U.S. As long as the 35 percent tax rate looms, though, that money will continue to benefit the economy in other countries.

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