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.
Labels: macroeconomics, microeconomics
posted by Scott Gustafson at
3/19/2011 03:18:00 PM
1 Comments:
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