Over Three Trillion US Dollars are locked up in overseas bank accounts because USA companies do not want to be double taxed (35% in the USA after the foreigners already taxed it originally) when it comes home. For over a dozen years, that money continues to sit in Swiss and London banks gaining paltry interest. Our current tax code compels our Corporate leaders to build foreign factories with that money since the alternative is that the cash sits useless gaining dust in foreign accounts.
Better idea - put the huge cash trove to productive use and grow American jobs and strengthen USA companies so they invest.
President Elect Trump has committed to create a tax reform package which incentives Americans to bring home their cash by paying a one time 10% surcharge to redeploy this money. Hedge Fund Chief Laurence Fink from BlackRock on Friday was quoted in the Wall Street Journal dismissing bringing this money home as "short-termism" because it will probably be spent on dividends and share buy backs. Mr. Fink, a successful and accomplished man, is right that some companies will use the returned cash for their shareholders (including 401k holders, retirees and union pension funds) by buying back stock and increasing dividends. Who knows, maybe these pensioners may redeploy the cash in a new domestic start up or a company on the ascent that needs funds for exciting new innovations which will create job growth?
Mr. Fink must remember, the cash windfall coming home is enormous. According to Factset, the S&P 500 (not including the financials) companies invested less than $700 billion in new tools and investments (capital expenditures) in the last twelve months ending September. If you add up all the shares repurchased and all the dividends paid (about $1 Tril in 2016), Trump's plan will bring back an additional $2 Trillion. If every company DOUBLED their dividends and share buybacks we would still be enjoying a $1 Trillion benefit to the USA. If one layers on the reduction in the corporate tax rate from 35% to 15% (For example Ford alone will save ~$2bil!) the reinvestments into USA plants will be off the charts in coming years.
I contend that most of that $3 Trillion (whether one or two $Trillion) will be used to build factories, create new R&D Labs, start new innovative product lines, replace tired old equipment and train workers for Industry 4.0. USA Factory workers with the latest tools will be more efficient and productive enabling USA companies to provide higher wages and richer benefits. Factory workers with fatter paychecks will buy more cars and homes which will accelerate the increasing head of steam that will be unleashed. This investment surge will be the cash catalyst for the USA American Manufacturing Renaissance.