American companies operating overseas are double taxed, in that they pay tax to the foreign country they’re operating in, and then have to pay the U.S. corporate tax to bring that money back to the U.S.
As a result, in the summer of 2016, there was $2.5 trillion in corporate cash parked overseas, sitting idly by. At the time, the corporate tax rate in the U.S. was 35 percent, the highest in the world. (RELATED: President Trump’s Proposed Corporate Tax Cuts Would Benefit Workers). It’s since been cut down to 21 percent as part of Trump’s tax reform package, and tax reform also further lowered the rate for repatriated cash (and other assets). Companies now only have to pay 15.5 percent on income held as cash and cash equivalents overseas, and 8 percent for illiquid assets held overseas. (RELATED: CBO Releases Proof Trump Tax Cuts are Working).
Since the change, cash has come pouring in. Apple announced that they’d be repatriating their entire $285 billion in cash held overseas (which would bring in $38 billion in tax revenue), while Cisco said they’d repatriate $67 billion.
According to Fox News, in just the first quarter of the year, over $300 billion was repatriated to the U.S., the most ever on record. “We fixed that really, really stupid thing”, said Kevin Hassett, chair of the president’s Council of Economic Advisers, during an interview on FOX Business. By comparison, just $38 billion was repatriated during the same period a year ago.
The figures are a bit more dramatic when viewed in terms of foreign earnings retained abroad:
And no, this $305 billion in repatriated funds cannot be mostly attributed to Apple repatriating their massive $285 billion cash hoard, because they haven’t yet repatriated it (though they are expected to repatriate those funds this year). Because of that, it wouldn’t be surprising to see similar repatriation figures in at least one quarter going forward.
For some context, if repatriations were to cease after $305 billion was repatriated in the first quarter of 2018, and Apple’s $285 billion was repatriated, that’s nearly a quarter of all corporate cash held overseas. And obviously, they don’t stop here but will continue indefinitely. (RELATED: Trump Tax Cuts Boosting Growth Big League).
It’s clear that Trump’s economic policies have encouraged American companies to reinvest in America, creating millions of new jobs along the way. If this strong economic news continues, Trump’s reelection will be a lock.
