If the Obama Administration would cave in and allow an 85% US federal income tax holiday for all foreign earnings parked overseas and repatriated back to the US by Multinational Corps, I think a very robust debt deal would be agreed to by the Republicans, which would include a fair amount of tax revenue.
But wisely, it's not going to happen. Instead, I think the Obama Administration will use the Unremitted Foreign Earnings, parked overseas by US Multinational Corps, as a piggy bank for targeted, desperately needed US job creation.
The Obama Administration was hustled again by Big Corps when they demanded 100% first-year tax expensing of equipment. While that certainly increased Big Corp earnings and US GDP growth, it did absolutely nothing in the way of US job creation, consistent with what has happened every time robust bonus tax depreciation has been enacted in the past. And it also created a short term drain on the US Treasury financial coffers.
The only way it makes sense to allow 100% first year tax expensing of equipment or very robust bonus tax depreciation is if it is tied to payroll count increases. That way, the economic benefit from the tax incentive is shared by all of the US citizenry.
Likewise, just like what happened in 2004 and 2005 with the 85% US federal income tax holiday on foreign earnings repatriation, there will be no US job creation from trying it again.
What did Albert Einstein say about continuing to repeat actions over and over again and expecting a different result?.....didn't he define this as "insanity"?
It will work much more effectively if the Obama Administration can control this very lucrative piggy bank, with very heavy Congressional oversight. But then it shouldn't be used for either "trickle down" or "trickle up" attempts at job creation that frankly haven't worked, but have been very expensive to the US government.
US Multinational Corps would really like to get their hands on all of their foreign earnings parked overseas in tax havens. If they were able to do this and at an acceptable income tax cost, they would be able to substantially increase their Pretax Income by having the flexibility to invest this money where they can derive a much better risk-adjusted rate of return. They also would be able to bump up their Earnings Per Share (EPS) nicely by using the money to buy back their own common stock. Further, they will feel a lot better having all of this money moved away from very financially risky tax havens like Ireland.
Thus, the optimal result in this Debt Ceiling Deal, which clearly should include a substantial reduction in US Debt, is to provide US Multinational Corps with wise Foreign Earnings Repatriation tax incentives, which directly create US jobs.
Below here shows the magnitude of the present Unremitted Foreign Earnings of US Multinationals. This was just from a quick review of the income tax footnotes of hundreds of US publicly-held corps. I just included below those Multinational Corps with Unremitted Foreign Earnings of a rounded $1.5 bil or above.
There were many US Multinational Corps that decided not to disclose their amount of Unremitted Foreign Earnings. One of the largest of these is United Technologies. When I compare their relevant numbers with that of other Dow Industrials, my hunch is that United Technologies' Unremitted Foreign Earnings now is north of $20 bil.
The total Unremitted Foreign Earnings of the below 166 US Multinational Corps comes to $1,291 bil, with the most recent year layer added of $193 bil. When I extrapolate that to the universe of all US Multinationals Corps, including privately-held ones, my best estimate is that the Total Unremitted Foreign Earnings is now about $1.8 trillion.
That's quite a piggy bank for US job creation. I think it's time to wisely raid this piggy bank, and keep doing it, with smart job initiative after smart job initiative. When you have such a horrible structural employment recession, you have to keep doing this, until you finally get a decent breakthrough.
Since the US House of Representatives Ways and Means Committee, which is where the job-creating tax legislation must initiate, has decided to continue to do nothing in the way of designing wise, targeted, cost effective tax incentives to create US jobs, things have continued to get worse on the employment front.....just like Albert Einstein defines "insanity".....doing the same thing over and over again and expecting different results. In this instance, the same thing being done over and over again is following the laissez-faire approach to improve the dismal US job situation.
...................................................Unremitted Foreign Earnings..
.........................................Most...................One.......Increase
.......................................Recent..Current....Year.....(Decrease)
.........................................FYE....Amount...Earlier..Amount..%
......................................................(in billions of dollars)
1 GE……………………….......Dec 10.....94.0.......84.0.....10.0...12%
2 Pfizer…………………........Dec 10.....48.2.......42.5.......5.7...13%
3 Merck………………….......Dec 10.....40.4.......31.2.......9.2...29%
4 JNJ……………………........Dec 10.....37.0.......32.2.......4.8...15%
5 Exxon Mobil………..…...Dec 10.....35.0.......42.0......(7.0).-17%
6 Citigroup……………….....Dec 10.....32.1.......27.3.......4.8...18%
7 Cisco Systems…………...Jul 10......31.6.......24.1.......7.5...31%
8 IBM…………………….......Dec 10......31.1.......26.0.......5.1...20%
9 Procter & Gamble……...Jun 10.....30.0.......25.0.......5.0...20%
10 Microsoft………………..Jun 10.....29.5.......18.0......11.5...64%
11 Abbott Labs………….....Dec 10....26.8.......20.6.......6.2...30%
12 PepsiCo………………......Dec 10....26.6.......21.9.......4.7...21%
13 Hewlett Packard……….Oct 10.....21.9.......16.5.......5.4...33%
14 Chevron……………….....Dec 10.....21.3.......20.5.......0.8.....4%
15 Coca Cola………………...Dec 10.....20.8.......19.0.......1.8.....9%
16 Schlumberger(1)………Dec 10.....20.3.......18.0.......2.3...13%
17 Eli Lilly…………………...Dec 10.....19.9.......15.5.......4.4...28%
18 JP Morgan Chase……...Dec 10.....19.3.......15.7.......3.6...23%
19 Apache…………………....Dec 10.....19.2.......15.3.......3.9...25%
20 Bank of America……….Dec 10.....17.9.......16.7.......1.2.....7%
21 Goldman Sachs………...Dec 10.....17.7.......16.2.......1.5.....9%
22 Google…………………....Dec 10.....17.5.......12.3.......5.2...42%
23 Amgen…………………....Dec 10.....17.2.......14.3.......2.9...20%
24 WalMart……………….....Jan 11.....17.0.......13.7.......3.3...24%
25 BristolMyersSquibb....Dec 10.....16.4.......16.5.....(0.1)..-1%
26 Oracle………………….....May 11.....16.1.......13.0.......3.1...24%
27 Medtronic………………..Apr 11.....14.9.......12.4.......2.5...20%
28 PMI……………………......Dec 10.....14.0.......14.0.......0.0.....0%
29 TE Connectivity Ltd….Sep 10.....14.0.......14.0.......0.0.....0%
30 DuPont…………………....Dec 10.....12.6.......11.3.......1.3...12%
31 Dell…………………….......Jan 11......12.3.......11.3.......1.0.....9%
32 Apple………………….......Sep 10.....12.3.........5.1.......7.2..141%
33 Intel……………………......Dec 10.....11.8.......10.1.......1.7...17%
34 McDonald's……………....Dec 10.....11.0.........9.2.......1.8...20%
35 Caterpillar………………..Dec 10.....11.0.........9.0.......2.0...22%
36 Qualcomm…………….....Sep 10.....10.6.........8.6.......2.0...23%
37 Dow Chemical…………..Dec 10.......9.8.........8.7.......1.1...13%
38 Boston Scientific……....Dec 10.......9.2.........9.4.....(0.2)..-2%
39 Corning…………………....Dec 10.......8.9.........7.3.......1.6...22%
40 Kraft………………………...Dec 10.......8.4.........5.7.......2.7...47%
41 Ebay……………………......Dec 10.......8.3.........7.9.......0.4.....5%
42 Alcoa…………………….....Dec 10.......8.0.........8.1.....(0.1)..-1%
43 Baxter…………………......Dec 10.......7.5.........6.8.......0.7...10%
44 American Express…....Dec 10.......7.4.........6.6.......0.8...12%
45 Kimberly Clark………….Dec 10.......7.3.........5.8.......1.5...26%
46 Ingersoll-Rand………….Dec 10.......7.1.........6.0.......1.1...18%
47 Xerox…………………......Dec 10.......7.0.........8.0.....(1.0).-13%
48 General Motors………...Dec 10.......6.9.........6.3.......0.6...10%
49 News Corp…………….....Jun 10.......6.8.........5.3.......1.5...28%
50 Bunge, Ltd……………....Dec 10.......6.8.........4.2.......2.6...62%
51 ArcherDanielsMidlnd.Jun 10.......6.6.........6.0.......0.6...10%
52 Danaher……………….....Dec 10.......6.5.........6.5.......0.0.....0%
53 Occidental Petrol........Dec 10.......6.0.........5.5.......0.5.....9%
54 Honeywell……………....Dec 10.......6.0.........5.1.......0.9...18%
55 Eaton…………………......Dec 10.......6.0.........4.9.......1.1...22%
56 Praxair…………………....Dec 10.......5.9.........5.3.......0.6...11%
57 Illinois Tool Works…..Dec 10.......5.7.........5.7.......0.0.....0%
58 3M…………………………..Dec 10.......5.6.........5.6.......0.0.....0%
59 Forest Labs……………...Mar 11.......5.4.........4.1.......1.3...32%
60 Emerson Electric……..Sep 10.......5.2.........4.3.......0.9...21%
61 EMC……………………......Dec 10.......5.1.........4.3.......0.8...19%
62 Morgan Stanley………..Dec 10.......5.1.........4.0.......1.1...28%
63 Murphy Oil……………...Dec 10.......4.8.........4.0.......0.8...20%
64 Cameron Intl…...........Dec 10.......4.7.........1.7.......3.0..176%
65 Johnson Controls……..Sep 10.......4.5.........3.8.......0.7...18%
66 Amerada Hess………….Dec 10.......4.5.........3.4.......1.1...32%
67 Gilead Sciences………..Dec 10.......4.5.........3.2.......1.3...41%
68 Valero Energy………….Dec 10.......4.4.........4.1.......0.3.....7%
69 Heinz……………………....Apr 11.......4.4.........3.3.......1.1...33%
70 International Paper….Dec 10.......4.3.........3.5.......0.8...23%
71 Stryker…………………....Dec 10.......4.2.........3.2.......1.0...31%
72 Berkshire Hathaway....Dec 10.......4.1.........3.8.......0.3.....8%
73 Franklin Resources…...Sep 10.......4.1.........3.4.......0.7...21%
74 Ally Financial…………..Dec 10.......4.1.........2.9.......1.2...41%
75 ConocoPhillips………….Dec 10.......4.1.........2.1.......2.0...95%
76 Western Digital………...Jun 10.......4.0.........2.5.......1.5...60%
77 Mattel……………………...Dec 10.......3.9.........3.5.......0.4...11%
78 Celgene…………………....Dec 10.......3.9.........2.8.......1.1...39%
79 ThermoFisherScientif..Dec 10.......3.7.........3.2.......0.5...16%
80 Monsanto………………...Aug 10.......3.6.........3.4.......0.2.....6%
81 Marsh & McLennan…...Dec 10.......3.6.........3.1.......0.5...16%
82 Nike………………………...May 10.......3.6.........2.6.......1.0...38%
83 Texas Instruments…….Dec 10.......3.4.........3.1.......0.3...10%
84 Agilent Technologies...Oct 10.......3.4.........3.0.......0.4...13%
85 Air Prod&Chemicals....Sep 10.......3.4.........3.0.......0.4...13%
86 Becton Dickinson……...Sep 10.......3.3.........2.6.......0.7...27%
87 CBS…………………………..Dec 10.......3.2.........3.0.......0.2.....7%
88 Paccar……………………...Dec 10.......3.1.........3.1.......0.0.....0%
89 Colgate Palmolive……...Dec 10.......2.9.........2.9.......0.0.....0%
90 US Steel…………………....Dec 10.......2.9.........2.9.......0.0.....0%
91 Celanese…………………...Dec 10.......2.9.........2.8.......0.1.....4%
92 Goodyear Tire.............Dec 10.......2.9.........2.8.......0.1.....4%
93 United Parcel Svc…......Dec 10.......2.7.........2.2.......0.5...23%
94 Aon…………………….......Dec 10.......2.7.........2.1.......0.6...29%
95 Bank of NY Mellon……..Dec 10.......2.7.........1.9.......0.8...42%
96 McKesson……………......Mar 11.......2.7.........2.3.......0.4...17%
97 Seagate Technology…...Jul 10.......2.7.........0.1.......2.6....NM
98 EOG Resources…………..Dec 10.......2.6.........3.0.....(0.4).-13%
99 AGCO…………………….....Dec 10.......2.6.........2.1.......0.5...24%
100 Yahoo………………….....Dec 10.......2.6.........2.0.......0.6...30%
101 Natl Oilwell Varco.......Dec 10.......2.5.........2.8.....(0.3).-11%
102 TRW Automotive........Dec 10.......2.5.........2.5.......0.0.....0%
103 Baker Hughes…………...Dec 10.......2.5.........2.3.......0.2.....9%
104 PPG Industries………….Dec 10.......2.5.........2.0.......0.5...25%
105 Western Union………....Dec 10.......2.5.........2.0.......0.5...25%
106 Overseas Shiphldg Grp.Dec 10.......2.4.........2.4.......0.0.....0%
107 Whirlpool………………...Dec 10.......2.4.........2.4.......0.0.....0%
108 Avon Products………....Dec 10.......2.4.........2.2.......0.2.....9%
109 Biogen Idec……………...Dec 10.......2.4.........2.2.......0.2.....9%
110 General Mills…………....May 11.......2.4.........2.1.......0.3...14%
111 Eastman Kodak………....Dec 10.......2.4.........1.8.......0.6...33%
112 Dole Food Co…………....Dec 10.......2.3.........2.4.....(0.1)..-4%
113 Analog Devices………....Oct 10.......2.3.........1.9.......0.4...21%
114 Computer Sciences…...Mar 11.......2.3.........1.3.......1.0...77%
115 Pride International…...Dec 10.......2.2.........2.0.......0.2...10%
116 Zimmer Holdings………Dec 10.......2.2.........1.8.......0.4...22%
117 Cognizant Tech Sols…..Dec 10.......2.2.........1.5.......0.7...47%
118 Ensco International……Dec 10.......2.1.........2.6.....(0.5).-19%
119 Allergan………………......Dec 10.......2.1.........2.2.....(0.1)..-5%
120 Prudential Financial….Dec 10.......2.1.........1.7.......0.4...24%
121 Safeway…………………....Dec 10.......2.1.........1.7.......0.4...24%
122 Symantec………………...Mar 11.......2.1.........1.8.......0.3...17%
123 Cardinal Health………...Jun 10.......2.0.........3.4.....(1.4).-41%
124 Carefusion……………....Jun 10.......2.0.........2.2.....(0.2)..-9%
125 Owens Illinois…………..Dec 10.......2.0.........1.8.......0.2...11%
126 Transocean……………...Dec 10.......2.0.........1.8.......0.2...11%
127 Costco……………………..Aug 10.......2.0.........1.6.......0.4...25%
128 Arrow Electronics…….Dec 10.......2.0.........1.4.......0.6...43%
129 Home Depot................Jan 11.......2.0.........0.5.......1.5..300%
130 Stanley Black&Decker.Dec 10.......1.9.........2.1.....(0.2).-10%
131 Marathon Oil…………….Dec 10.......1.9.........1.9.......0.0.....0%
132 ITT……………………….....Dec 10.......1.9.........1.7.......0.2...12%
133 Vishay Intertechnol...Dec 10.......1.9.........1.7.......0.2...12%
134 Adobe………………….....Oct 10.......1.9.........1.5.......0.4...27%
135 Sempra Energy………...Dec 10.......1.9.........1.5.......0.4...27%
136 Genworth Financial…. Dec 10.......1.9.........1.4.......0.5...36%
137 CIT Group………………..Dec 10.......1.9.........0.2.......1.7....NM
138 Deere………………….......Oct 10.......1.9.........1.3.......0.6...46%
139 MeadWestvaco………...Dec 10.......1.8.........1.7.......0.1.....6%
140 Southern Copper……...Dec 10.......1.8.........1.8.......0.0.....0%
141 St Jude Medical………...Dec 10.......1.8.........1.4.......0.4...29%
142 Best Buy………………......Feb 11.......1.8.........1.3.......0.5...38%
143 Chiquita Brands………...Dec 10.......1.7.........1.7.......0.0.....0%
144 Ingram Micro…………...Dec 10.......1.7.........1.6.......0.1.....6%
145 SPX……………………….....Dec 10.......1.7.........1.6.......0.1.....6%
146 Avnet………………….......Jun 10.......1.7.........1.5.......0.2...13%
147 Rockwell Automatn…...Sep 10.......1.7.........1.4.......0.3...21%
148 Waters Corp…………......Dec 10.......1.7.........1.4.......0.3...21%
149 Tidewater………………....Mar 11.......1.7.........1.5.......0.2...13%
150 Broadcom....................Dec 10.......1.7.........0.2.......1.5..750%
151 Borg Warner……………...Dec 10.......1.6.........1.6.......0.0.....0%
152 Accenture……………......Aug 10.......1.6.........1.5.......0.1.....7%
153 Noble Corp…………….....Dec 10.......1.6.........1.5.......0.1.....7%
154 Wells Fargo…………….....Dec 10.......1.6.........1.4.......0.2...14%
155 Altera…………………........Dec 10.......1.6.........0.9.......0.7...78%
156 Amazon.com………….....Dec 10.......1.6.........0.9.......0.7...78%
157 Interpublic Group……...Dec 10.......1.5.........1.6......(0.1)..-6%
158 Time Warner……………...Dec 10.......1.5.........1.6......(0.1)..-6%
159 Herbalife………………......Dec 10.......1.5.........1.3.......0.2...15%
160 Kellogg…………………......Dec 10.......1.5.........1.3.......0.2...15%
161 Lexmark……………….......Dec 10.......1.5.........1.3.......0.2...15%
162 Mastercard……………......Dec 10.......1.5.........1.3.......0.2...15%
163 General Dynamics……....Dec 10.......1.5.........1.2.......0.3...25%
164 Noble Energy………….....Dec 10.......1.5.........1.2.......0.3...25%
165 State Street Corp………...Dec 10.......1.5.........1.2.......0.3...25%
166 Microchip Technlgy......Mar 11.......1.5.........1.1.......0.4...36%
Total...................................................1,291...1,098......193....18%
(1) Schlumberger 2010 amount is estimated based on its actual 2009 amount disclosed, and using the relevant other disclosures in 2010 and earlier years.
