Discussion: Obama To Propose Tax On Foreign Profits In 2016 Budget

Discussion for article #232720

No matter what the President proposes, we already know the repug response. It’s conditioned.

The GOP will bite. It should be called the Apple Cash Repatriation Tax.

1 Like

It’s hard to believe that this keystone of all strong economies is now considered a controversial idea. Only in the Twilight Zone that has become the Republican Party would it even be debated. Tax the vulture capitalists like they have been for thousands of years. Make them give up their spare change. They will never miss it but our nation is stagnating because of their sins and corruption.

5 Likes

By itself the tax is a non-starter. Lower the overall rate and make dividends tax deductible at the corporate level, while you close all the specialized corporate tax loopholes and tax overseas profits. Right now the United States has the highest corporate tax rate in the world. The effective rate is closer to the world standard, but that means a lot of small to medium sized companies are paying a lot while big companies are not paying their fair share. Encourage companies to pay dividends to investors instead of sit on piles of profit.

That’s actually not a good idea. What you want to be doing is encouraging them to reinvest their profits into expanding their business, and thus creating more jobs.

From a corporate finance perspective, a company paying out a dividend is telling its investors that they can get a better ROI investing some where else. It’s a rather basic mathematical equation that makes that decision. The smart thing to do is to change the tax code to encourage more re investment, while making paying out dividends a less attractive option.

4 Likes

Right now they do neither. Trust me, as you get older you will gravitate to stocks that pay solid dividends especially when other investments are as flat as they are today.

I guess you are right if you view the stock market as a big casino where we all place our bets and takes our chances, but dividends are traditionally the way we take value out of a company. Dividends give investors incentive to insist on solid corporate management. The gambling hall model leads to corporate executives capturing boards to make personal millions.

Stock price valuation is based upon projected future earnings, dividends are typically a very small part of the total valuation. If a company is a good industry and has solid management, they should be investing in growing those future earnings. As an industries growth potential slows, the earnings slow as well, and the potential to invest in other, higher growth markets becomes more attractive, management will start paying out dividends…basically, the ROI is better elsewhere than it is in their company.

It has nothing to do with viewing the stock market as a big casino…quite the contrary. There of course is a degree of uncertainty, as future earnings is never actually known…but most public companies are under pretty heavy scrutiny from stock analysts and they build a pretty solid expectation of what those earnings will be.

The market has hardly been flat. Its had a tremendous run since '09. But, when you invest looking for dividend payments, you are invariably going to be adding a lot of lower return stocks to your portfolio, reducing your over all return. They are lower risk, and typically in industries more “mature” with slower growth…thus the have lower growth potential in their stock price.

2 Likes

What a shame you are locked out of more lucrative investments by your limited investment capital. If you were a Good American™ you’d have your own hedge fund by now. At least you’re not such a poor that you have to rely on Social Security or the goodwill of strangers.

1 Like

The president most likely knew that any taxation proposal would be DOA even though taxation is the way to raise needed revenue. What he has proposed could be the outline, the blueprint, whatever, for those Democratic candidates emerging for 2016. He’s the leader of the party, and he’s going to remain so for a while.

2 Likes

Agree, this is a good plan for moving forward an agenda, but I also think it has other advantages.

The reduced tax rate might – only might, not will – be seen as an inducement to avoid future taxes at higher rates. And some of these companies might be convinced of the benefits such a deal can provide them. For example, Caterpillar tractor and earth-moving company, with lots of sales overseas, could benefit by a large domestic program focused on infrastructure and capital improvements. Likewise, other companies might be convinced of the vital role of infrastructure in shipping their products

Also, I think it is good that the President is coming out with such an aggressive stance, which leaves him room to make concessions should the Republicans seek to compromise and make a deal (I know, again, it’s unlikely, but it does leave Obama with bargaining room.)

1 Like

You seem to be so very informed about tax policy and its bearing on infrastructure and the domestic economy. It’s always a pleasure to read your thoughts on these issues. In return I promise no more pics or even mention of He Who Must Not Be Named.

2 Likes

Thank you, but I can claim no special expertise in tax policy, only an interest in infrastructure’s potential role in an economic revival. I have read proposals over the years that have investigated various means of financing massive infrastructure projects, either through direct government spending, some tax reform deal that encourages the right-shoring of trillions of dollars parked overseas, savings bonds, tapping into union pension funds, through streamlined public-private partnerships, etc.

I grew up in a heavily industrialized Midwest town that became the Rust Belt after a lengthy period of massive disinvestment and runaway factories – first to the southern non-union Sun Belt states, and then overseas.

As a child, I would wake up to the plaintive sounds of a train whistle – a sound evoking the promise of a new and better life elsewhere which entranced the early blues and folk musicians – and I worked my way through school working in a factory that made railroad panels and doors.

And I feel passionately that we need to replace finance capitalism’s focus on unproductive, speculative investments with a focus on policies that encourage productive investments that create jobs and improve standards of living for the working class and also promote the types of skills that enable workers to move up.

I am also concerned that the accumulated skills of an entire generation of machine tool workers, tool-and-die men, machinists, boilermakers, die setters, welders, press operators, pipe fitters, etc. are soon to become a lost art if we do not prepare a new generation in the industrial arts.

Also, these skills tap into the areas of the brain – innovation, hands-on experimentation, spatial relationships, an emphasis on science, technology, engineering and math to define, identify and solve problems – that are neglected in our finance- and consumerist-dominated economy.

Additionally, I think an emphasis on these trades, and on the type of economy that is focused on building up the entire supply chain – and not just the prototype or end product – will provide us with more in-depth economic strength and provide the cultural optimism that has fueled the imaginations of inventors, researchers, innovators etc.

Also, with Europe teetering on the brink of a new recession, and Chinese economic growth slowing, we need to focus our efforts on boosting our domestic economy. A good trade deal with Europe or Asia might lead to increased international trade, but we need to get our own house in order first.

And as far as the pics of Jebbie, I promise to avert my eyes in the future, but I will continue to read your insights with interest.

4 Likes

More meaningful and more sincere than any Sunday sermon I’ve ever heard. Thanks for it.

1 Like

Well said!

If corporations were to invest in Vocational-Technical schools to train kids in the skills needed to design, build and maintain the products they sell…

but wait…we don’t build anything anymore in America. And the things like iPhones, iPads game consoles, TVs and appliances that are built overseas are built with obsolescence as part of the design.

America used to build most everything, excepting automobiles, to have a useful life of ten to twenty years. How do we revive our own steel and textile industries in this day and age Randy?

I watched a news program this morning about an engineering firm in South Dakota, Daktronics. What was unique about this company was that it;s founders, two engineering professors at the small local college, started it with the idea that it might keep local kids from South Dakota from leaving the state for jobs elsewhere.

Here is the company today…we see their results everywhere. And we need more like them!

http://www.keloland.com/newsdetail.cfm/daktronics-light-up-stadiums-across-the-country/?id=173623

1 Like

Really, you are making this personal? You have no idea how I am invested and what kind of investment capital I have. I am what is called an entrepreneur. I own two successful businesses. I might not have my own hedge fund but I will never rely on the goodwill of strangers or Social Security. My concern is what happens to the next generation. I have 4 kids and several grandkids I want to live in a world where things are better for them than they have been for me.

As to the business school finance capital model, the model that says we don’t need to make anything as long as our financial institutions dominate world capital, the Dutch tried that model and it really didn’t work out.

2 Likes

Thanks, Sooner, unfortunately I don’t have a formula for an industrial revival, but there are things that give me hope:

Some – albeit small – numbers of factories are returning to the US, because of our cheap and plentiful energy sources, our highly skilled workforce, the strength of our patent and intellectual property rights laws, the narrowing of the income gap between domestic and foreign workers, and the increasing recognition of the need, for both economic and logistical reasons, to bring production closer to markets;

The US, strong economically and relatively politically stable, is increasingly becoming a haven for overseas investment that may be tapped for infrastructure and industrial investments;

The attempt – unsuccessful last year, but hopefully they will try again – of Volkswagen to establish a Worker’s Council at their Tennessee plant. US laws limit these councils to plants that also feature a labor union, and various Republican politicians including Gov. Haslan and US Senator Corker helped kill the attempt to unionize by employee vote. VW still wants to import their strong, worker-empowering worker-management relationship model into the US, and this is a development that bears watching;

The successful implementation of a program offering free community college in the state of Tennessee and the city of Chicago, which Obama is now championing as a nationwide program;

The improvement in the nation’s balance sheet, as witnessed by the shrinking national deficit, which politically might provide some breathing room for increased spending on Obama’s priorities;

The Obama administration is developing various federally-funded “hubs” in an attempt to jump-start economic activity. One, intended to advance the field of 3D printing, has been established in my former hometown of Youngstown, Ohio;

The announcement a few months ago by the National Retail Federation, the trade association representing major retail firms, that their biggest barrier to increased growth is not the evil gub’mint regulations or taxes but stagnant wages and sluggish consumer spending. That this powerful trade bloc now recognizes this as a crucial factor to their continued success bodes well for the chances that they can be enlisted into support of this campaign;

A seeming softening between Obama and Congress on the need to address income inequality and the sluggish recovery – or, at the very least, the admission by some leading Republicans that this is indeed a problem. An emphasis on infrastructure spending would lead to increased orders for industrial products and the services of engineering firms, and the resulting economic activity would yield spin-off " economic multiplier" and incubator effects;

An anticipated desire of now-Senate Majority Leader Mitch McConnell to hammer out some legacy-burnishing policy achievement with the administration. That fact that the Republicans now control both chambers of Congress means they must deal with the President if they hope to have any bills of theirs enacted – they can no longer complain that “all our great job-creating bills are stuck on Harry Reid’s desk”;

So, no, there is no “magic bullet” to achieve this, but I hope that all these factors, together in conjunction with the attempt of this or the next administration to rally support for crucial investments, can get us closer to realizing this goal.

3 Likes

I just saw the clip, and it was interesting. Thanks for sharing.

If only we all had MBA’s.

The world needs more MBA’s, finance majors and lawyers…

please, just shoot me

2 Likes

Randy, seriously consider writing a book weaving your life experiences into the economic and political changes over the years and the impact on the American dream of possibilities and promise.

You write beautifully and those few paragraphs in your post were compelling. I would buy it … :slight_smile:

1 Like