The Historical and Mathematical Case for Repatriation


Posted by Jacob Feldman on Thursday, December 8th, 2011, 1:56 PM PERMALINK

According to analysis by JP Morgan, there are $1.4 trillion of earnings waiting to be returned to the United States if only US tax policy was friendlier to business activity.  A 2011 study found that a one-time repatriation tax rate of 5.25% (instead of the difference between the US’ 35% rate and the foreign tax rate already paid) would increase economic growth by $360 billion and create 2.9 million jobs within two years. Industry and academic studies present a favorable view of what repatriation could do for economic growth.

  • Shapiro and Mathur find that repatriated funds in 2004 were used to create or retain over 2.14 million jobs, and generated $34.5 billion in new federal revenues. Repatriation increased dividends to American shareholders eightfold when the US temporarily exempted foreign-source dividends.
  • Dhammika Dharmapala, Fritz Foley and Kristin Forbes found in their 2004 study that each $1 increase in repatriated earnings was associated with increased payouts to shareholders between $0.60 and $0.92. 24 percent of the dividends repatriated were reportedly used for US capital investment, 23.5 percent for the hiring and training of US employees, 14.7 percent for US research and development, and 12.4 percent for paying down domestic debt.

 

Repatriation is a first step toward reforming the US’ anti-competitive tax system toward an internationally competitive territorial tax system. History and the numbers tell a story of how repatriation can put Americans back to work now.

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