If you expect your shareholders to get much better overall tax treatment on the money sometime in the relatively near future, it makes a lot of sense to hold on to it.
Especially with respect to money earned abroad, I'd think that's a decent guess. In particular, I'd expect there will be another one-time-only-we-really-mean-it-this-time repatriation holiday in 2017 or 18.
> In particular, I'd expect there will be another one-time-only-we-really-mean-it-this-time repatriation holiday in 2017 or 18.
Nobody even really takes advantage of those because it isn't about repatriation. It's about the interest.
If you have a pile of cash (really investment securities) held by MegaCorp in some low tax jurisdiction, it pays the low tax rate on the interest the money generates. If you repatriate the money and then invest it in the same things MegaCorp was, now the taxes you owe on the future interest are in the high tax jurisdiction. Nobody is interested in doing that even if you could repatriate the money tax-free.
The only reason to repatriate the money is if you want to spend it, which large investors don't do with most of their money (because they make far more than they spend), and which anybody can do at any time by selling shares, which has preferable tax treatment to dividends anyway but has the unfortunate side effect of leaving the entire pile of cash (and all subsequent interest) inside the original corporation forever.
The only way to get around this is to stop taxing investment income. Which is of course completely unfair to everyone else unless you also stop taxing earned income and tax consumption instead. The objection then being that taxing consumption instead of income is advantageous to rich investors who spend a smaller percentage of their income than other people, except that that is the status quo.
Qualified dividends are taxed at the long term capital gain rate. One time, special dividends aren't, but that's just a reason to use a regular dividend instead.
Investors could just sell shares if they wanted to raise money, but then they lose out on future growth in the company's value. Sending out profits to shareholders in the form of a regular dividend allows owners to have a concentrated investment in the business the company is in rather than it being diluted with some low risk / low return pile of investments.
The 2004 holiday saw about $312B repatriated. That may not be a huge number compared to the $1.9T discussed in the article but it hardly supports the claim that "nobody even really takes advantage".
> Qualified dividends are taxed at the long term capital gain rate. One time, special dividends aren't, but that's just a reason to use a regular dividend instead.
That's not what I mean by preferred tax treatment.
If you get $120 as a dividend then you have $120 worth of taxable income. If you sell $120 worth of shares which you bought at $100 then you have $20 worth of taxable income. Even if the rate is the same, you're still paying significantly less in taxes because less of it is considered income.
> Investors could just sell shares if they wanted to raise money, but then they lose out on future growth in the company's value. Sending out profits to shareholders in the form of a regular dividend allows owners to have a concentrated investment in the business the company is in rather than it being diluted with some low risk / low return pile of investments.
Yes, that is the problem we would like to prevent.
But investors prefer that bad thing to happen over paying more taxes, so it does.
> The 2004 holiday saw about $312B repatriated. That may not be a huge number compared to the $1.9T discussed in the article but it hardly supports the claim that "nobody even really takes advantage".
I obviously didn't mean that literally zero people take advantage of it. That is not a large percentage of the total. And how much of that "repatriated" money is actually still in the country and not just an instance of people taking advantage of the tax holiday by moving money into the country during the holiday to reset their tax basis in it and then moving it back out to a tax haven again?
Especially with respect to money earned abroad, I'd think that's a decent guess. In particular, I'd expect there will be another one-time-only-we-really-mean-it-this-time repatriation holiday in 2017 or 18.