Thanks To Tax Cuts, Companies' Overseas Profits Now Flooding Back To U.S.
IBD ^ | 06/27/2018
Posted on 6/27/2018, 12:28:55 PM by SeekAndFind
They said it wouldn't happen, but it did: The money companies stashed overseas to protect them from high U.S. corporate tax rates is flooding back in, boosting growth, jobs and confidence in the economy. Thank the Trump tax cuts.
All told, the Bureau of Economic Analysis (BEA) reported, some $305.6 billion returned to the U.S. from overseas accounts. That's a $1.2 trillion annual rate, and far more than the $35 billion one year before.
The BEA's analysts explain why this happened: "The large magnitudes (of inward capital flows) ... reflect the repatriation of accumulated earnings by foreign affiliates of U.S. multinational enterprises and their parent companies in the United States in response to the 2017 Tax Cuts and Jobs Act."
In short, the Trump tax cuts did it.
American companies were commonly estimated to have about $2.6 trillion parked in overseas accounts as of 2017. So in the first three months of 2018 alone, some 12% of that overseas stash came back to the U.S. It's now available here for companies to invest, pay out in dividends and bonuses, hire new workers, purchase new plants and equipment, or just buy back stock.
It's a shot in the arm for the U.S. economy.
Of course, you say. It's entirely logical to suppose that by slashing the top corporate tax rate from 35% to 21% — a 40% reduction — and by giving one-time breaks to those companies that had piles of cash sitting overseas, money would flow back into the U.S. After all, Trump's 21% tax rate is now lower than the current OECD average corporate tax rate of 25%.
But last year, when the tax cuts were still a topic of conversation, some in the media seemed to have trouble with this idea.
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