Did you know that there is an estimated 2 trillion dollars that could be invested back in the US economy and it would not cost taxpayers a dime? Ted Cruz and Donald Trump have both talked about it on the campaign trail. I first heard it mentioned by David Perdue before he formally announced that he was running for US Senate.
You may hear the term, “repatriated income.” Under our tax laws, if a US company owns a business outside of the United States, the profits of that business are taxed at the corporate tax rate of 35% if those profits are brought back into the United States. If the profits are never brought back to the US, then they are not taxed by the US.
Let me explain this in middle class kitchen table terms. Suppose you have money in two banks. We’ll call them Hometown Bank and Death Star Bank.
You have your paycheck deposited to your local Hometown Bank and you have a savings account in Death Star Bank. Each month you transfer $100 from Hometown Bank to Death Star Bank.
The CEO of Death Star bank, D. Vader, wants to have more of your money in his bank. He wants your direct deposit to go to Death Star Bank.
You receive a letter from D. Vader informing you that there will be an administrative fee of 35% on all funds that are transferred from accounts outside of Death Star Bank. So, in order to maintain your savings plan of $100 per month, you will need to transfer $153.85 or have your direct deposit come to Death Star Bank.
So, what will you do? Will you contact your employer and have them make a direct deposit to Death Star Bank instead of Hometown Bank? Will you increase your monthly transfer from $100 to $153.85 so that you will still be able to save $100 a month? Will you just accept the Death Star Bank taking $35.00 out of your monthly savings leaving you $65 a month for savings?
The truth is that you will probably have the account at Death Star Bank closed before the day is over and move it to a savings account at Hometown Bank. Corporations operate the same way. It is not that complicated.
Our tax policy is as brilliant as D. Vader’s plan to increase deposits at Death Star Bank. D. Vader acts as if he can order you to do what he wants you to do. Individuals and corporations alike will make financial decisions based on what is in their best interests.
Our tax policy for foreign earnings should be simple. Pay the taxes where the profits are earned. Bernie Sanders and Hillary Clinton will cry that this will lead to those filthy corporations moving more jobs to other countries.
On the contrary, when our tax policy encourages investment at home, we will see more jobs created in the United States. We have already borrowed and wasted over 830 billion dollars to “stimulate” the economy. There are two trillion dollars sitting in foreign banks that could be back in the United States.
People like us with accounts in Hometown Bank who manage our household finances around the kitchen table can understand that. The problem is that the D. Vaders are the ones who make tax policy.
We need people in Washington who understand the reality of the middle class kitchen table.
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