(New York Post) -- As part of the tax-reform bill that the Republicans pushed through Congress last year, companies with profits that were stuck overseas were allowed to bring those earnings back to the US and have them taxed at a very favorable rate.
I’ve written about this profit “repatriation” lots of times. It was the most efficient way to get help for the economy without having the side effect of raising the federal debt.
In fact, allowing companies like Apple and Microsoft to repatriate billions in foreign profits actually increased the tax revenue collected by the feds because those profits were sitting overseas untaxed for years. Debt would go down, although by just a little.
So, that much of the idea was good.
But the next part wasn’t. The Trump administration didn’t attach any strings to the money that was being repatriated. It didn’t, for instance, require companies to invest a portion of that repatriated money in new facilities or equipment.
It didn’t — as I suggested a long time ago — make the tax-advantaged repatriation of those foreign profits contingent on those companies creating jobs.
I don’t know who suggested this idea first. But I do know that I can trace my advocacy of profit repatriation at least back to a Sept. 13, 2012, column I did that had the headline: “My 3-step plan to save the US. You’re welcome.”
“A company should be able, for instance, to bring a specific portion of its profits back home at a substantially reduced tax rate if it increases its payroll by a certain amount,” I wrote in that column, which incidentally ran when the debt level was at “just” $16 trillion. (Today, it’s over $21 trillion.)
If a company reneged on expanding and creating jobs, it would have to pay a penalty that would raise the tax to its regular rate in my plan.
Instead, Trump and the Republicans in Congress allowed companies to do whatever they wanted with the repatriated money. No strings. No rules.
So instead of being taxed at up to the 35 percent corporate tax rate, those overseas profits — some $1.4 trillion — were taxed at 8 percent to 15 percent.
Corporate executives cheered. They could use those repatriated profits to buy back their company’s stock. That would raise share prices and make them richer than they already were.
Thank you, American taxpayers, for your generosity!
It hasn’t only been companies with profits stuck overseas that have been buying back shares. Lots of companies have been using the new tax law’s lower rates to buy back shares.
Bank of America, for instance, says that share buybacks were at their highest level ever during the first quarter of 2018 — when the corporate tax cuts went into effect. Its survey found there were $124 billion in stock buybacks in the first quarter compared with just $82 billion in the fourth quarter of 2017 and $66 billion in 2017’s third quarter.
And the funnier thing is this. Even with companies as such large buyers of stock, the overall market has been wobbly.