The Financial Times reports Multinationals Pay Lower Taxes Than a Decade Ago. The article notes ” Effective rates have fallen 9 percent since the financial crisis.”
Brad Setser has a string of Tweets.
Excellent reporting on global tax by the FT. Recommended. https://t.co/mmIplrYhy6
— Brad Setser (@Brad_Setser) March 11, 2018
I am interested in the widespread belief the tax cuts will spur investment. That’s an angle the article did not cover.
Here’s another pertinent chart from the article, anecdotes again mine.
Trapped Cash Unleashed?
Trapped Cash Myth
For starters none of that cash was “trapped” in the first place.
For discussion, please see Trapped Funds Myth: Foreign Cash Repatriation Boom in Reverse.
Moreover, history shows where repatriation holidays go: share buybacks, not investment.
Record Buybacks
Here’s the real deal: Record Buybacks at Worst Possible Time.
JPMorgan estimates $800 billion in buybacks this year, a new record. Companies will squander money in an obvious bubble.
Record Dividends
Goldman sees dividends expanding to $515 billion.
Any company that says it will increase investment because of the cuts is likely outright lying (plans were already in place), is exaggerating the amount of the increase, or the amount of the increase is too insignificant to matter.
There will not be a trump investment boom. Instead, Trump’s foolish tariff war will provide the exact opposite. For further discussion, please see Trump Provides Clarity to EU: “Big Deficit We Tax Cars”.
Mike “Mish” Shedlock
It says in the Preamble to the U.S. Constitution: as to the reason for government – “To promote the General Welfare.” That clearly means that the Founding Fathers thought the government should have a role in fostering prosperity. How that is done may be debated, but the government’s role in the economy has always been central.
Typo: “Tax cuts have not resulted in wage gains for workers.” Only a few temporary bonuses for PR effect.
This is the old trickle-down economic scam: give tax cuts to the rich and corporations in the hope that it will stimulate the economy. It has never worked and it never will. Under Bush, the tax cuts to corporations did not cause an increase in investment that would bring new production and jobs. Tax cuts have not resuin wage gains for workers, except for execs, who got huge bonuses.Instead, the tax windfall allowed companies to boost their stock price with buybacks, which does nothing to stimulate the general economy. Consumer spending is 70% of GDP. But the working class did not see a big influx of money. Instead it was the rich who got a tax windfall. And they don’t buy very much. The tax cuts will create $1,5 trillion in new federal debt, which will have many bad effects on society. So the tax cuts are a terrible mistake that will have profound negative effects.
Considering the sheer level of pumping and hyping of anything the harebrains can be suckered into calling “investment” over the past half century; the probability that what ails the “economy” is a lack of “investment,” as currently construed, is darned near nil.