Financial Advice for Retirement, Social Security, IRAs and Estate Planning

Tax Cuts And Corporate Cash

September 11, 2018

A major goal of tax reform was to make U.S. corporations more competitive with overseas companies by reducing their tax burden closer to the global average. The tax cut also was designed to encourage U.S. companies to bring back to the U.S. a lot of the cash they’ve stashed overseas because of the high tax cost of spending it in the U.S. This article argues that the law accomplished those goals and dramatically increased corporate cash flow for at least one year.

The Fed’s estimate of total cash overseas is a good deal lower than other estimates that have been as high as $2.5 trillion, so the amount of cash brought home might be even higher.

Companies had been holding profits in foreign countries to avoid additional taxation when it was brought back to the U.S. Under the Tax Cuts and Jobs Act, the foreign holdings were subject to just a one-time tax, thus eliminating the incentive to keep the money offshore.

 

 

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