For decades before President Donald Trump’s tax plan took effect, U.S. corporations with foreign subsidiaries had no (sane economic) choice but to keep their overseas profits abroad. After all, they’d face double taxation if they wanted to bring them home. Their profits were already taxed by the foreign country they’re operating in, and then to repatriate those funds would’ve required them to pay the U.S. corporate tax rate, which was then among the highest in the world. By year end 2017, right before Trump signed his Tax Cuts and Jobs Act (TCJA), upwards of $2.5 trillion in cash was parked overseas.
The TCJA reduced the corporate tax rate from 35% to 21%, but offered extra incentives to repatriate cash. After all, we’d rather have that money in America for economic reasons regardless of how much the government can get their hands on. The Trump tax law allowed corporations to repatriate cash at a discounted 15.5% tax rate, and a reduced 8% rate to repatriate other assets that are non-cash or illiquid.
While estimates differ on how much cash was parked overseas pre-TCJA, between 40% and 66% has made its way back to America.
According to Bloomberg:
Corporations have brought back more than $1 trillion of overseas profits to the U.S. since Congress overhauled the international tax system and prodded companies to repatriate offshore funds, a report showed. The flow rose to $95.3 billion in the third quarter from a downwardly revised $70.4 billion in the previous three months, according to Commerce Department data, reaching a total of $1.04 trillion since the end of 2017.
Investment banks and think tanks have estimated that American corporations held $1.5 trillion to $2.5 trillion in offshore cash at the time the law was enacted.
And it’s not just business doing well. Real disposable person income rose by nearly $6,000 since the TCJA, of which nearly half can be attributed to the tax changes (based on how much wages grew above projections).
For as much as liberals will try to convince you otherwise, it’s undeniable that the Trump tax cuts worked.