Trump
May Bring $2 Trillion in U.S. Profits Home
After taking the oath office on
January 20, President Donald Trump may have a rare opportunity to bring
billions of dollars back to the U.S. He would do so by closing tax loopholes that allow companies such as
General Electric Corp. (GE), Apple Corp. (AAPL), Exxon Mobil Corp. (XOM) and many others that are currently keeping at least $2 trillion in
profits abroad to avoid taxes at home.
$2 Trillion in Profits
While the
presidential election was divisive, and many real policy issues were ignored or marginalized, there is a growing political
consensus among Republicans and
Democrats that the time
has come for changes in the tax code in order to encourage repatriation of the
vast troves of both individual and
corporate earnings held outside our country. Companies under current rules can
say that foreign profits are permanently or indefinitely reinvested abroad, thus deferring taxation. The
amount is estimated at anywhere between $2.4 trillion to $3 trillion." See
also: (Can the Next President Kill Carried Interest?)
Trump's Challenge
During the election campaign,
both Trump and his
Democratic rival, Hillary Clinton, vowed to close tax loopholes and make the
tax code more fair and
straightforward. Closing loopholes on profits stored abroad is another fix. Of
course, a newly elected Trump will face opposition from the corporate lobby and certain investor groups who
see this potential move as a negative pressure on
profits. It is also not
always easy to accurately discern and attribute what foreign assets belong to whom and how much taxes would be
owed on it. Still, assuming an average corporate tax rate of 35%, being able to
tax $2 trillion in profits stored abroad would bring the U.S. government $700
billion in new revenue.
Jobs Engine
This money could be used to
bolster the U.S. economy and
its citizens by creating jobs at home, fixing crumbling infrastructure, and going toward education and skill training - and that's with the $2 trillion
figure being on the low end of the range of the amount of money out there. (See
also: Overseas Cash Hoards: Shareholder Boon or
Taxpayer Burden?)
Republican Healing
With a Republican in the White
House as well as Republican majorities in the Senate and House, it would be theoretically easier to
reach a political consensus to close tax loopholes that are deemed unfair.
Achieving this may depend heavily on Trump's ability to heal political wounds and work with establishment
Republicans he feuded with during the election.
