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Wednesday, October 20, 2010

A Free Repatriation Stimulus

John Chambers, CEO of Cisco Systems and Safra Catz, President of Oracle, had a great suggestion in the WSJ for Obama and Congress - simply allow a tax-free repatriation holiday for the $1 trillion in cash that belongs to U.S. companies but sits in overseas accounts because it would be taxed at 35% if brought back home.

The U.S. government's treatment of repatriated foreign earnings stands in marked contrast to the tax practices of almost every major developed economy, including Germany, Japan, the United Kingdom, France, Spain, Italy, Russia, Australia and Canada, to name a few. Companies headquartered in any of these countries can repatriate foreign earnings to their home countries at a tax rate of 0%-2%. That's because those countries realize that choking off foreign capital from their economies is decidedly against their national interests.

...By permitting companies to repatriate foreign earnings at a low tax rate—say, 5%—Congress and the president could create a privately funded stimulus of up to a trillion dollars. They could also raise up to $50 billion in federal tax revenue. That's money the economy would not otherwise receive.

It's simple math, but in the name of Democrats' view of "fairness," they won't take advantage of this free $1 trillion surplus.