On August 29, 2013, Dave Johnson writes on NationOfChange.org:
The amount now being held outside of the country is astounding. Some estimates say that it is as much as $1.5 to 2 trillion, or even more. If the full amount were brought back and the tax rate applied that would bring a $525-700 billion windfall that the government could use to hire people to get things done that really, really need to get done like modernizing our infrastructure, hiring teachers, building high-speed rail, retrofitting homes and buildings to be energy-efficient … so many things… (Of course it would be less because of taxes paid elsewhere, etc., but we’re still talking hundreds of billions.)
Beyond the one-time windfall from bringing that cash back there would be two other major effects of changing this deferral loophole. The first, of course, is that tens of billions of revenue now withheld each year would be coming in to be taxed, thereby reducing the budget deficit. But perhaps more important, the incentive to move jobs, factories and profit centers (“crown jewels”) out of the country would be eliminated, so companies would keep factories and jobs here.
Why They Do It
The reason so much $$ is being kept away is that companies have good reason to believe that eventually they will be allowed to bring it back without paying the taxes they owe. Congress made a huge mistake in 2004 and gave corporations a “tax repatriation holiday.” They allowed companies that were holding profits outside of the country to bring those profits back without paying all of the taxes due. This created the expectation that Congress will of course do this again (and again). So, not looking a gift horse in the mouth, companies started to find ways to increase their outside-the-country profits and reduce their inside-the-country profits. Jobs, factories, production, profit centers (desks, chairs, carpets…) and everything else that could be moved out of the country started to be … moved out of the country. And it gets worse every year.
This proposed “fix” of the “deferral” tax loophole would certainly bring additional tax revenues to the government. But what remains to be discussed is how to use the monies and the stipulations for broadened individual ownership where those monies are spent with companies in the private sector.
We also need to apply the proven principles of insurance to the financing of FUTURE wealth-creating, income-generating productive capital assets. We need to empower individuals to acquire multiple company diversification ownership facilitated with private capital credit insurance or a government reinsurance agency (ala the Federal Housing Administration concept). The promissory note can be offset to the government’s central Federal Reserve Bank in return for the cash equivalent of the amount of the loan, less an administrative fee. The only cost to the direct lending bank in making a loan to the corporation would be the administrative fee, or about 2 percent of the loan’s principal and then another 2 percent for capital credit insurance, with an additional quarter of a percent paid to the Federal Reserve Bank to monetize the loan and give the lender the same cash as it would have had if it had actually loaned money to the corporation. The lender’s cash loaned to the company’s Employee Stock Ownership Plan (ESOP) trust and/or the individual Capital Homestead Account or “CHA” (a super-IRA or asset tax-shelter for citizens) is replenished with the Federal Reserve Bank cash. When the company pays the ESOP trust or CHA enough money to enable the trust(s) to repay the lender, the lender has to retrieve the note and pay back the Federal Reserve Bank. Thus, the loan cost would be essentially not more than 5 percent to allow ownership broadening financial capital to be invested in ownership broadening ESOP and CHA trusts to create new capitalists. Thus, national capital credit insurance replaces the requirement for pledging past savings and security (which for the most part the most Americans do not have).
See “Financing Economic Growth With ‘FUTURE SAVINGS’: Solutions To Protect America From Economic Decline” at NationOfChange.org http://www.nationofchange.org/financing-future-economic-growth-future-savings-solutions-protect-america-economic-decline-137450624
http://www.nationofchange.org/corporate-tax-idea-fixes-lots-problems-1377783890
