Politics, Moderate



Republicans have only one idea. And Trump's pitch for it is a doozy.

Catherine Rampell on

This, too, is a difficult argument to swallow, at least in the current economy. By nearly every available metric, firms are not exactly starved for capital.

Long-term price-to-earnings ratios are high. Corporations are sitting on mountains of cash that they can't find good uses for.

Debt remains cheap, and businesses generally say they don't need more of it. The most recent National Federation of Independent Business economic trends survey found that only 3 percent of small-business owners said they could not satisfy all their borrowing needs. That's close to an all-time low.

Allowing a repatriation of profits held abroad through a tax holiday or a new, ultra-low corporate tax rate would likewise do little to stimulate corporate investment (or hiring). Last time we did that, the cash went mainly into stock buybacks.

Trump nonetheless alluded to this pitch in his Wednesday tax speech, which was, as expected, all bluster and few specifics.

The bulk of Trump's tax-cut speech, though, involved a relatively new pitch: an incoherent screed about trade.

"We must reduce the tax rate on American businesses so they keep jobs in America, create jobs in America, and compete for workers right here in America, the America we love," he proclaimed.

Trump essentially argued that U.S. taxes -- and not, say, wages or other input costs -- are driving firms to invest and hire abroad rather than here. But that argument would make sense only if the United States didn't tax worldwide earnings, as we currently do.

If you're an American company, it doesn't matter if you manufacture here or in China; your worldwide profits are still taxed in America, at least at the point when you try to return money to shareholders.

Trump clearly knows this because he also complained about worldwide taxation in his speech.

Granted, there's a lot of uninvested cash sitting abroad, not yet returned to shareholders, that corporations are not currently paying taxes on. But if those corporations brought that money home today to build a factory or hire more American workers, they could already deduct those costs and ultimately wipe out the tax bills on the income they brought back in. Regardless of what the tax rate is.

Every quarter Apple could always send less money to Ireland and build more facilities in the United States. U.S. corporate income-tax rates don't change that calculation.

Not that any of this matters a whit to our Marketer in Chief. He's seen the other sales pitches fall flat, so naturally he'd try to shoehorn an amorphous tax plan into his usual, all-purpose policy pitch: America good, foreigners bad, now give me what I want.


Catherine Rampell's email address is crampell@washpost.com. Follow her on Twitter, @crampell.

(c) 2017, Washington Post Writers Group



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