Is there a pot of U.S. multinational money parked overseas? Yes, approximately $2.3 tr. Will the U.S. government temporarily lower U.S. tax rates by 85% again, as it did in 2004, so those firms will bring roughly $565 b. of it home? No, at least not during the next two years, mainly because studies show the 2004 dividend repatriation didn't create many jobs here, and most of it went to buy back shares and to pay dividends. The Senate rejected it in early 2009. President Obama opposes it, and, even if the Republicans take Congress, they won't have enough votes to overcome a Senate filibuster or a veto.
The Financial Times touted the idea Tuesday, starting a lot of talk on foreign currency trading desks.
The Senate rejected it by 42-55 on February 3, 2009, when Senators Barbara Boxer (D-CA) and John Ensign (R-NV) proposed it as an amendment to the stimulus bill, The American Recovery and Reinvestment Act, P.L.111-5.
The American Jobs Creation Act of 2004 enacted the first dividend repatriation. Here's the legislative language. Firms could choose which tax year to claim it (2004 or 2005) and could claim the greater of $500 m. or the amount of earnings permanently invested outside the U.S. They had to file a plan for reinvesting the repatriated dividend in the U.S.
The IRS reported that 843 firms (out of roughly 9,700 eligible firms) repatriated $362 b. of which $265 b. could be used to reduce their taxable income. Pharmaceutical and computer firms, by far the heaviest repatriators, repatriated approximately 29% of the overseas earnings.
The Congressional Research Service analyzed dividend repatriation in this February 11, 2009 study. CRS cited two studies showing that the dividends repatriated in 2004 failed to stimulate the economy or generate many domestic jobs. Most of the money went to shareholders through share repurchases and dividend payments. See this NBER paper. Even though the 2004 law prohibited using repatriated dividends for share repurchases and dividend payments, "money is fungible." That is, the companies designated the repatriated dividends for the purposes required by the law, but since those uses were already being paid for, funds were freed up in like amount for share repurchases and dividend payments.
CRS found the 2004 dividend repatriations were heavily concentrated in a few firms: over half in the top 15 -- Pfizer; Merck; Hewlett Packard; Johnson & Johnson; IBM; Schering-Plough; Dupont; Bristol-Myers Squibb; Eli Lilly; PepsiCo; Proctor and Gamble; Intel; Coca Cola; Altria; and Motorola.
CRS also found that U.S. multinationals anticipate another chance to repatriate and have grown their unrepatriated earnings abroad by about 80% or nearly $1 tr. since 2005, bringing the total to about $2.3 tr.
On January 28, 2009,The Wall Street Journal published this op-ed by Allen Sinai in favor of dividend repatriation. He estimated that dropping the current 35% top corporate income tax rate by 85% to 5.25% for one year would bring a dividend repatriation of $545 b.
The Center for Budget and Policy Priorities countered with this.
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