So, US corporations have lots of cash. Ritchie says:
As he shows, US non financial corporations have $4.8 trillion in cash – or about $16,000 for everyone in the US.
That’s why they don’t need tax breaks to invest – they already have all the cash they need. They just can’t find anything to do with it. So they’re trying to capture public revenues for private gain instyead because it is the oinpy waty they can think to make money right now.
I have a better idea. Let’s tax them and pout the money to use in the public sector where there is masses to be done. We can be selective – we just need to tax companies with excessive cash. But the impact on recovery and debt would be significant. And that’s why this is a good idea. Why should those without suffer because those with are hiding their cash behind corporate barricades?
Someone who does actually understand what Cay Johnston is talking about (that\’ll be me then) points out that actually, no, we want to lift the tax burden so that the cash gets distributed:
At which point the use of the carrot rather than the stick becomes the obvious move. Simply provide that, for one year only, any and all foreign profits can be brought onshore with no corporate income tax charge. Further, that any such profits brought onshore can be paid out as dividends without incurring a tax charge on the recipients.
Now, of course, we will not get all of that $5 trillion. Let’s imagine that only half of it comes back as US corporations really do need to have some money overseas to finance overseas operations. At which point we can see that there will be a $2.5 trillion stimulus in the US economy. Some 15% of GDP or so. And all of this without increasing the Federal budget deficit or the national debt by even one penny. A huge, massive (it’s near three times the size of Obama’s previous attempt at stimulus) boost to the domestic economy at pretty much no cost. All we’ve got to do is agree not to tax something that we’re not going to be able to tax anyway.
We’ll move some trillions of dollars from unproductive overseas accounts into the hands of individual investors here inside the US. They will then either spend or invest it. Sounds pretty stimulative to me and I really cannot see why anyone would oppose it. A 15% of GDP stimulus at zero cost: what’s not to like?
Less tax, not more, is the solution to this particular problem.