In addition, reform of the current U.S. corporate tax system has been widely debated as an option to stimulate the economy. Most of the debate has focused on lowering the corporate tax rate and moving toward a territorial system. An exception to this is a plan to reduce the tax rate on repatriated dividends that has received some consideration. Under such a plan, the U.S. tax that U.S. firms pay when their overseas operations remit ("repatriate") their foreign earnings as dividends to their U.S. parent corporations would be reduced. Variations of a basic repatriation proposal have been introduced in several bills, including H.R. 937 , H.R. 1036 , H.R. 1834 , H.R. 2862 , S. 727 , and S. 1671 in the 112 th Congress. A conceptually similar proposal was enacted as part of the American Jobs Creation Act ( P.L. The provision provided a temporary reduced rate for repatriated earnings, with the condition that the repatriated earnings be used for domestic investment. While empirical evidence is clear that this provision resulted in a significant increase in repatriated earnings, empirical evidence is unable to show a corresponding increase in domestic investment or employment by firms that utilized the repatriation provisions. A similar provision was considered, but not adopted, as a floor amendment to a Senate version of the American Recovery and Reinvestment Act of 2009. However, proposals to adopt a phased-in repatriation at a lower tax rate have been coupled with proposals to make a permanent more to a territorial tax, where active earnings of foreign operations would not be subject to U.S. tax. 108-357 ) reduced the taxes due on repatriated earnings. Simply put, the more the repatriated earnings are used to shore up a corporation's balance sheet or paid to shareholders the less the simulative effect of the repatriations. This range of the stimulative effect for loss carrybacks should likely be viewed as an upper-bound estimate for the cash-flow effect of a repatriation rate reduction.
From the start of the 112th Congress, reform of the current U.S. corporate tax system has been widely debated as an option to stimulate the economy. Most of the debate has focused on lowering the corporate tax rate and moving toward a territorial system. An exception to this approach is a plan to reduce the tax rate on repatriated dividends that has received some consideration. Under such a plan, the U.S. tax that U.S. firms pay when their overseas operations remit ("repatriate") their foreign earnings as dividends to their U.S. parent corporations would be reduced. Variations of this type of proposal have been introduced in several bills, including H.R. 937, H.R. 1036, H.R. 1834, H.R. 2862, S. 727, and S. 1671 in the 112th Congress.
A conceptually similar proposal was enacted as part of the American Jobs Creation Act (P.L. 108-357). The provision provided a temporary reduced rate for repatriated earnings, with the condition that the repatriated earnings be used for domestic investment. While empirical evidence is clear that this provision resulted in a significant increase in repatriated earnings, empirical evidence is unable to show a corresponding increase in domestic investment or employment. A similar provision was considered, but not adopted, as a floor amendment to a Senate version of the American Recovery and Reinvestment Act of 2009.
Viewed in the current debate on how to most efficiently stimulate the economy, economic theory suggests that the simulative effect of a temporary tax cut for repatriations may be offset, or more than offset, by exchange rate adjustments that would reduce net exports. In addition, how businesses use repatriated earnings will impact the stimulative or contractionary effect of a tax cut for repatriations. For example, repatriated earnings will have a larger stimulative effect, or smaller contractionary effect, the greater the degree to which they are used to increase current investment. A smaller stimulative effect or a larger contractionary effect will result, in contrast, if more of the repatriated earnings are used to shore up "cash-flow" issues or pay dividends. This report will be updated as legislative events warrant.
Proposals to adopt a phased in repatriation at a lower tax rate have been coupled with more recent proposals to make a permanent more to a territorial tax, where active earnings of foreign operations would not be subject to U.S. tax.