Veteran financial guru Larry Kudlow, who served as the Donald Trump campaign's senior economic adviser, said the president-elect's plan for a ''tax holiday'' so that American companies can bring back profit that was generated overseas at a lower rate will revitalize America.
"You will re-oxygenate the entire economy," said Kudlow, a Newsmax Finance Insider, radio talk-show host and CNBC senior contributor. "I just think repatriation of cash is absolutely terrific," he told CNBC.
While Trump thinks the influx of cash will create jobs, the New York Times reported that corporate boards and executives may have different ideas. “They are likely to use much of the estimated $2 trillion held overseas to acquire businesses in the United States, to buy back their own stock or to pay down debt, say advisers of America's top corporate executives,” the Times reported.
Trump has said he wants to repatriate such corporate profits with a one-time rate of 10 percent. That is about a third of what is required by the current law, which says companies need to pay up to 35 percent of their earnings to the government, and then get credited for taxes they have already paid overseas, which usually is not much.
“If they were to bring that capital back, those companies could use it to invest in their businesses, which may in turn create jobs. Yet that is only one of several options,” the Times reported.
For instance, companies may use the extra cash on more merger deals, the Times reported.
“If the priority turns out to be deals, that would be good news for investment bankers who generate fees from large advisory assignments. It would be less so for American workers who might get laid off as a result of cost cuts derived from combining two companies,” the Times reported.
Kudlow explained that regardless of the details of its use, more cash back for companies is ultimately a positive force.
"However corporations use it in the United States is a good thing, not a bad thing. You’re going to unlock cash and put new cash in investor hands whether dividends, whether shareholder buybacks or if it is M&A," said Kudlow also is a leading candidate to chair the White House Council of Economic Advisers, The Wall Street Journal reported, citing people familiar with the transition.
"More money creates more capital formation" and jobs in the long run, said Kudlow — host of "The Larry Kudlow Show" and author of "JFK and the Reagan Revolution: A Secret History of American Prosperity," written with Brian Domitrovic and published by Portfolio.
"More money is going to come through the private economy one way or another. That money is not going into a mattress," said Kudlow, who was a key architect of Trump’s tax platform and an early supporter of the real-estate billionaire's campaign.
"It is going to be reinvested. I call it re-oxygenation. It is a five-dollar word and very important for a big economy," said Kudlow, who worked as Reagan’s budget deputy between 1981 and 1985.
(Newsmax wire services contributed to this report).
Larry Kudlow is a senior contributor at CNBC. His new book is “JFK and the Reagan Revolution: A Secret History of American Prosperity,” written with Brian Domitrovic.
To find out more about Larry Kudlow and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate web page at www.creators.com
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