Saturday, March 19, 2011

Stifling US Investment

Buried in the last paragraphs of a story about Cisco starting to pay a dividend is an interesting factoid.

The dividend will cost $1.3 billion annually. Cisco had $40.2 billion in cash in February, but only $3.1 billion is in the U.S. The rest sits at overseas subsidiaries.

Cisco has been reluctant to repatriate that money, because it will then be taxed at the 35% U.S. corporate tax rate.

US corporations have one to two trillion dollars in cash today. They are hesitant to invest it in the US for a number of reasons, mostly due to uncertainty about government policy. However, if the earnings are overseas, and you have to pay 35 cents on the dollar to bring them home, I can understand leaving them overseas. That also makes investing in the US really expensive.

Other countries have figured this out and charge a very small (0 - 2%) repatriation tax. This is one of the areas where corporate tax revenues would probably increase if the tax rate was lowered.

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1 Comments:

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July 19, 2011 at 11:40:00 AM MST  

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