Here is my proposal for how total foreign earnings repatriation tax tranches should be applied for foreign earnings repatriated by a US multinational corp in 2010:
…..First, to the Jobs Tax Credit, with a 40% (?) Dividend Received Deduction (Job Creation Proposal #4)
...Second, to the Research Tax Credit, with a 40% (?) Dividend Received Deduction (Job Creation Proposal #6) (This is a late insertion)
…..Third, to the Manufacturing Tax Credit, with a 40% (?) Dividend Received Deduction (Job Creation Proposal #5)
…..Fourth, next $1 bil of Foreign Earnings Repatriated, with a 40% (?) Dividend Received Deduction
…..Fifth, next $1 bil of Foreign Earnings Repatriated, with a 25% (?) Dividend Received Deduction
…..Sixth, next $2 bil of Foreign Earnings Repatriated, with a 10% (?) Dividend Received Deduction
…..Last, remainder of Foreign Earnings Repatriated, with No Dividend Received Deduction
This should be considered a one-time, temporary foreign earnings repatriation program, driven by the horrible US jobless recovery, by the depressed US manufacturing sector, by the US housing crash, by many other economic stresses on the US economy, and also by a sense of measured fairness to US multinational corps, which have over $1.1 trillion of unremitted foreign earnings at the end of 2009, with much of it locked up overseas because of the very expensive income tax cost of repatriating these foreign earnings back to the US.
I think the maximum amount of foreign earnings that can be repatriated from now through Dec 31, 2010 to a US company should be the unremitted foreign earnings amount disclosed in that company’s income tax footnote to their Dec 31, 2009 or earlier audited financial statements.
Let me illustrate how the numbers would work for a US multinational corp.
Total amount of Foreign Earnings Repatriated by a US multinational corp in 2010: say $10 bil
…..#1: Jobs Tax Credit Earned….assume $300 mil, and also assume that applicable Foreign Earnings Repatriated to yield this Additional Federal Income Tax, with a 40% (?) Dividend Received Deduction, of $300 mil, is say $1.8 bil
...#2: Research Tax Credit Earned...assume $400 mil, and also assume that applicable Foreign Earnings Repatriated to yield this Additional Federal Income Tax, with a 40% (?) Dividend Received Deduction, of $400 mil, is say $1.5 bil
…..#3: Manufacturing Tax Credit Earned…..assume $200 mil, and also assume that applicable Foreign Earnings Repatriated to yield this Additional Federal Income Tax, with a 40% (?) Dividend Received Deduction, of $200 mil, is say $1.2 bil,
…..#4 Next $1 bil of Foreign Earnings Repatriated, with a 40% (?) Dividend Received Deduction
…..#5 Next $1 bil of Foreign Earnings Repatriated, with a 25% (?) Dividend Received Deduction
…..#6 Next $2 bil of Foreign Earnings Repatriated, with a 10% (?) Dividend Received Deduction
…..#6 Next $1.5 bil (i.e. $10 bil – $2 bil – $1 bil – $1 bil – $1.2 bil – $1.5 bil - $1.8 bil) of Foreign Earnings Repatriated, with No (No ? Needed Here) Dividend Received Deduction
CBO scoring here should be gigantically positive. Also, states will generate tons of additional tax receipts, mainly from the taxable dividends of the US multinational corps. Because the state tax amount is so huge, I think that the US Federal Government should consider hiring a bunch of exceptionally qualified state tax experts, who will be able to provide needed support to all of the States, on this very complex issue, and on multistate and other key complex issues.
