President Donald Trump once promised that, following the passage of the GOP tax bill in late 2017, the United States would be awash in repatriated corporate profits.
Now, a new report from his own administration is pouring cold water on that assurance.
Commerce Department data released Wednesday showed just how little money corporations have brought back to the United States since the passage of that tax law, the Tax Cuts and Jobs Act of 2017, which also slashed corporate tax rates dramatically.
In the fourth quarter of 2018, corporations repatriated $85.9 billion from abroad, bringing the 2018 total to $664.9 billion, according to a report from the Bureau of Economic Analysis. There was an initial spike, with $294.7 billion returning in the first quarter, followed by a steady decline into the fourth quarter, which was the lowest of the year.
While the $664.9 billion in 2018 is more than the $155.1 billion brought back in 2017, it is nowhere close to the amount Trump promised.
Congress passed the tax bill at the end of 2017 with no Democratic support. Last August, Trump told business leaders at an event at his golf club that, before he signed it, corporations had billions stuck overseas, but that thanks to the law, “we expect to have in excess of $4 trillion brought back very shortly.”
“But we expect that it could be — the number started out at about $2.5 trillion; we think it’s going to be close to $5 trillion,” he said, speaking to business leaders from PepsiCo, Boeing, FedEx, Mastercard, and Honeywell. “Over $4 [trillion], but close to $5 trillion, will be brought back into our country. This is money that would never, ever be seen again by the workers and the people of our country.”
In September, White House spokesperson Lindsay Walters defended the president’s numbers to The Wall Street Journal, calling $3.9 trillion a “plausible lower bound. As a businessman, the president understands that.”
“There are reasons to expect that pace to remain strong, as large scale corporate financial decisions like this aren’t made overnight,” she said.
The tax law imposed a one-time 15.5 percent tax rate on liquid assets (and 8 percent on illiquid assets), whether or not the money came back to the United States, instead of applying the normal corporate tax rate on any repatriated profits earned abroad. The ostensible goal was to encourage companies to invest their profits and assets in the United States, building infrastructure, hiring workers, and paying for local services.
While there was a brief increase in the beginning of 2018, it has since faded, with nowhere near the massive economic impact of $4-5 trillion in capital returning to the country that Trump predicted.
Another equally important data point from the Commerce Department report is that the current-account deficit — how much investment, services, and goods are flowing in and out of the country — increased yet again last quarter. The trade balance deficit was $126.6 billion in the third quarter, rising 6 percent to $134.4 billion in last quarter. In 2018, the deficit reached $488.5 billion, which is the highest it’s been since 2008.
Trump made shrinking the trade deficit a top promise in his campaign and a top priority as president.