More than $2.6 trillion, all of it earned by American multinational corporations, sit idly in foreign banks. About 20 percent of that hoard is owned by only five large tech companies — Apple, Alphabet, Microsoft, Cisco and Oracle.
These firms, among others, have spent record sums of money this year lobbying U.S. lawmakers to make it cheaper for them to repatriate their cash. At 35 percent, the current federal corporate income-tax rate is among the highest anywhere in the world, and as foreign governments continue to lower their own rates, companies like Apple are less and less incentivized to bring their profits home.
Imagine if that $2.6 trillion were allowed to reenter the U.S. economy and be put to work. It would be a boon not only for investors and shareholders but also American workers, families and communities.
But reducing the corporate tax rate will take — figuratively and literally — an act of Congress, which so far this year has had little success in delivering on President Donald Trump's political agenda, even with a Republican majority. With hopes of repealing and replacing Obamacare officially dashed for now, Congress appears ready to move on to comprehensive tax reform after the August recess, but we could be in for even more gridlock.
It's mainly for this reason that many economists are starting to rethink their U.S. growth estimates. In July the International Monetary Fund revised down its forecast for domestic economic growth, from 2.3 percent to 2.1 percent in 2017 and from 2.5 percent to 2.1 percent in 2018. According to the Washington-based fund, the decisive factor in the revision "is the assumption that fiscal policy will be less expansionary than previously assumed, given the uncertainty about the timing and nature of U.S. fiscal policy changes."
Translation: It's going to take Trump & Co. longer than we initially thought to make good on tax reform, deregulation, debt reduction, infrastructure spending and other promised agenda items.