Companies Would Have Several Options For How To Use Repatriated Capital
An analysis in the New York Times “DealBook” column states that President-elect Trump has called for a “tax holiday” to enable American companies to bring back profits made overseas at a lower rate, on the belief that the “influx of cash will create jobs.” However, advisers to the nation’s top executives say corporate boards and executives “are likely to use much of the estimated $2 trillion held overseas to acquire businesses in the United States, to buy back their own stock or to pay down debt.” According to the analysis, if companies’ “priority turns out to be deals, that would be good news for investment bankers who generate fees from large advisory assignments,” but workers “might get laid off as a result of cost cuts derived from combining two companies.” On the other hand, Forbes contributor Tim Worstall calls the “DealBook” column “one of the more ridiculous pieces of economic analysis I’ve seen for a long time.” Worstall states that the analysis is based on the assumption that only directly investing the repatriated profits would create jobs, “which is just nonsense,” he says. Worstall explains that regardless of how companies choose to spend the money, “the money doesn’t disappear.” The only impact of how money is spent is that “it just changes who makes the decision of whether to spend or invest it,” and either option “creates jobs,” says Worstall.
What This Means For Small Businesses
Should President-elect Trump enact a “tax holiday,” companies would be likely to bring back profit generated overseas. While companies could choose to spend this money in several different ways, additional money in circulation would benefit the economy and be likely to create jobs.
Additional Reading
CNBC and Reuters also provide opinions on the impact of a tax holiday.
Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.
