Posted by: Howard Silverblatt on October 22, 2010
The new discussion on cash repatriation is very political. The 5.25% tax rate from the repatriation (American Jobs Creation Act of 2004) in 2004/5 still doesn’t sit well with many, given that there ‘appeared’ to be no jobs or increased U.S. Capital Expenditure created, and a case has been made that it permitted more buybacks. Counter arguments to that are ‘if they bring it back they will spend it’ has developed, but also has comparing it to the banks, ‘if you give them money they may not lend it’. Then there is the appearance of giving corporate America a much lower tax rate while personal rates are scheduled to go up - which is being countered with examples of companies spending abroad so they don’t get taxed. True economic issues, but also a lot of politics.
From my view, given the large holdings of cash (and limited data on exactly how much is abroad), and the ability to borrow from one pocket to fund the other, short-term, I would need to be shown that the money would stimulate the economy, and create U.S. jobs. Longer-term, the issue of domestic growth verses current tax revenue will need to be addressed, perhaps as early as next year, under a reorganized management in Congress.