Until income of non-resident real persons (read:corporate entitles earned income from foreign active business operations (not affiliate earnings -- earned commissions)) is repatriated from offshore interests/entities owned it is not subject to US taxes.
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- To provide external validation of our framework and establish a basis for assessing counterfactual policy, we compare our model predictions from a tax holiday with evaluations of the AJCA in the literature.
- We find that our model captures the key empirical findings surrounding the AJCA.
- We thus exploit our framework to evaluate the impact of leading repatriation tax reform proposals.
- In particular, we consider two proposals.
- The first is a permanent elimination of repatriation taxes (a territorial tax system).
- The second is a permanent reduction in U.S.corporate income tax rates.
- Currently, repatriation tax rates are set as the difference between U.S. and foreign income tax rates of the firm.
- As the top U.S. marginal corporate income tax rate is the highest in the OECD, a reduction in U.S. corporate income tax rates indirectly lead to a fall in repatriation tax rates.
- For both of these policy proposals, we find that the long-run costs in terms of tax revenue are large, while the gains in employment and investment are relatively low.
- Again, when firms are able to substitute debt for repatriated income, a firm’s domestic operations are able to operate close to their efficient scale regardless of repatriation tax rates.
- As a result, a fall in repatriation tax rates have a relatively small impact on the scale of a firm’s operations, but rather leads to a tax windfall for shareholders at the expense of U.S. tax revenue.
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http://lamacro.davidson.edu/wp-conte...ly-6056151.pdf
I think a repatriation tax holiday is still included in the bill.
Taxes paid on foreign income are applied toward taxes on repatriated income by treaty.
Most people do not understand what is being proposed in Congress now.
Bottom line: There may be a $6 trillion reduction pd IRS revenue to the US government. Any savings to persons with an AGI of less that $60K are going to be minimal.