Tax repatriation is hot issue in regards to corporate tax

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The issue of tax repatriation is a hot issue in regards to corporate tax policy. Right now, U.S.-based multinationals are not taxed by the U.S. government on what they earn overseas, until they bring that money back to the U.S. Bringing those earnings back to the United States could cost a company up to a 39% tax. While these companies are taxed by foreign governments on their earnings in destinations from Britain to China, keeping the money abroad means the U.S. doesn’t collect on the difference between the foreign rates and the almost always higher tax rates that the United States charges. According to a report in March 2014 by Credit Suisse’s David Zion, the cumulative earnings parked by S&P 500 companies overseas is over $2 trillion, and there is at least $690 billion in overseas cash. The amounts are now even higher. The graph below shows the growing amount of earnings parked outside of the US. The tax code allows companies to avoid taxes on oversees earnings so that US companies can compete in foreign markets. The US corporate tax rates are clearly higher than imposed elsewhere around the world. While this seemed like a good idea years ago, the impact has created a disincentive for companies to bring dollars back into the US and invest at home. Lower tax rates would certainly give these US companies an incentive to bring dollars back into the US and invest here. Right now, it is not suprising that expansion would take place outside of the United States. Do you believe that the US Corporate Tax rate is too high? Would it be wise to lower the corporate tax rate for all US companies? Explain your answer. A paragraph should be sufficient.

Reference no: EM131524923

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