Monday, March 18, 2013

Rosenbloom on proven incentives to get offshore cash back home

David Rosenbloom has a great letter to the editor in Tax Notes today [gated], excerpts:
Recent press reports describe a large increase in January tax receipts as taxpayers shifted substantial amounts of income forward into 2012 in order to avoid the higher taxes anticipated for 2013. 
...We have been told, again and again, that there must be lower tax rates on accumulated foreign earnings in order to provide an appropriate incentive for U.S. multinational companies to repatriate the enormous sums they hold offshore.  
...It turns out that incentives can be created just as well by raising taxes as by lowering them
Who knew?
Nice. Empirical evidence that to get cash repatriated, the trick is to raise taxes with enough lead time for companies to move thing around. Best part: this process is totally repeatable next year.

1 comment:

  1. I can't read the gated article but the US raised individual income tax rates last year not corporate income tax rates so how much of a real effect did this have. Is Rosenbloom proposing raising CIT rates THIS year. Then there is the question of deferral. Is Rosenbloom or anyone else actually proposing eliminating deferral at this point.

    My view is changes in individual rates probably have a marginal effect on US corporate overseas cash stockpiles although there is probably detailed figures behind the pay wall that actually show how much the offshore cash stockpiles went up or down.