Tags: US Stands to Gain 1 Trillion if Tax Policy Is Right

US Stands to Gain $1 Trillion if Tax Policy Is Right

Wednesday, 20 Oct 2010 12:43 PM

Cisco Systems CEO John Chambers and Oracle head Safra Catz say the approximately $1 trillion that U.S. companies have in foreign operations could be available to boost the economy if the IRS would simply stop penalizing companies for succeeding overseas.

“The amount of corporate cash that would come flooding into the country could be larger than the entire federal stimulus package, and it could be used for creating jobs, investing in research, building plants, purchasing equipment, and other uses,“ the two write in The Wall Street Journal.

“It could also provide needed stability for the equity markets because companies would expand their activity in mergers and acquisitions, and would pay dividends or buy back stock,” they wrote.

“And when markets go up, confidence increases and businesses and consumers begin to spend.”

Large cash balances remain on U.S. corporate books because U.S. companies can't spend their foreign-held cash in the U.S. without incurring a prohibitive tax liability of 35 percent, Chambers and Catz observe. With bond rates falling below 4 percent, the combined federal and state tax rate would be closer to 40 percent.

“The U.S. government's treatment of repatriated foreign earnings stands in marked contrast to the tax practices of almost every major developed economy, including Germany, Japan, the United Kingdom, France, Spain, Italy, Russia, Australia and Canada, to name a few,” Catz and Chambers point out.

“Companies headquartered in any of these countries can repatriate foreign earnings to their home countries with little or no tax cost because those countries realize that imposing a tax burden would be against their national interests.”

According to the Financial Times, the Obama administration is opposed to giving corporations a tax break on repatriated earnings, but the U.S. Chamber of Commerce is sounding out conservative “Blue Dog” Democrats about the prospects for legislation after the November elections.

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Cisco Systems CEO John Chambers and Oracle head Safra Catz say the approximately $1 trillion that U.S. companies have in foreign operations could be available to boost the economy if the IRS would simply stop penalizing companies for succeeding overseas. The amount of...
US Stands to Gain 1 Trillion if Tax Policy Is Right
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2010-43-20
Wednesday, 20 Oct 2010 12:43 PM
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