Friday, GE announced a massive restructuring to focus on manufacturing and divest itself its finance arm, GE Capital. Part of the transaction is bringing home $36 billion dollars stuck in overseas banks back to the USA incurring a new $6 billion tax on money that was already taxed overseas. Ouch--$6 billion tax bills hurt. GE has postponed bringing this money home for years because of this extra tax. Stryker and Ebay recently bit the bullet and paid stiff taxes to bring home money.
Here is the problem, GE like the other 999 largest US companies are not bringing their cash hordes home that amount to over $2.3 trillion because it will get hit with an outrageous 35% levy. This is over 9% of their assets are sitting overseas that is not put to its highest and best use. We are the only industrialized country that does this. This shortsighted tax hurts Americans bad.
This unique tax causes a series of big problems for Americans because our companies don't bring home money and they let it sit in overseas banks.
We want our companies using this cash now investing in their factories. Our manufacturing would be more successful with the latest tools and resilient for future economic shocks.
Ready for a painful grimace--our tax system encourages our companies to actually invest in foreign plants and companies rather than taking a 35% penalty to bring it home. We want US corporate titans encouraged to invest here and not overseas.
Americans will be the biggest beneficiaries of this money coming home since companies will invest in their local factories so they are more competitive or create new product lines. Some skeptics say the companies will use the money for share buybacks or dividends. Cash used to pay dividends helps fund pension funds (owners of domestic company stock) and sweeps through our economy to find more productive uses (vs sitting in a foreign bank).
It is time to urge Washington to reform our tax code so our companies can bring home cash they earned and already paid taxes on so they can invest back home.