As we’ve been documenting, a group of multinational corporations have launched a campaign called “WinAmerica,” in an attempt to convince Congress to approve what’s known as a tax repatriation holiday. This tax holiday would allow corporations to bring money that they have stashed overseas back to the U.S. at a dramatically lower tax rate (instead of the 35 percent rate that they would normally pay).
JP Morgan’s chief equity strategist Thomas Lee has now jumped into the fray on behalf of his corporate brethren, promoting the holiday as a boost to the economy. “From a market’s perspective, this likely represents a substantial catalyst,” he wrote. However, just two months ago, JP Morgan analysts were singing a very different tune, finding that a repatriation holiday would do little good for the economy:
The JP Morgan researchers weigh in on the subject of repatriation and conclude that even in the unlikely event such a tax holiday is created — it’s opposed by the Obama administration — while there is a House bill on the matter, there is no companion legislation in the Senate — it would not result in a flood of repatriation. This is largely because much of the over $1 trillion worth of undistributed earnings overseas will likely be reinvested across the pond.
The corporations pushing for a repatriation holiday claim that it would create jobs and promote domestic investment. But corporate America is currently sitting on a record amount of cash, so the idea that it needs more to start creating jobs should be met with skepticism.
Plus, Congress already tried such a holiday in 2004.The companies that benefited most wound up cutting jobs, and companies started stowing even more money offshore in anticipation that another repatriation holiday could be wrung out of Congress.
Congressional Republicans have jumped on board the repatriation push, introducing a bill that would let companies pay just a 5.25 percent tax rate on money they bring in from offshore. The Joint Economic Committee found that a repatriation holiday would cost nearly $80 billion over 10 years.