David R. Kotok
Cumberland, May 1, 2017
Taxes: some quick bullets.
Markets like lower taxes. People like lower taxes. Businesses like lower taxes. Devils always lurk in the details: those devils are put there by Congress.
Congress will lose if it attempts to block a tax cut. Voters understand lower tax rates and want them. Voters do not focus on longer-term deficit projections. Voters do not care about CBO scoring or a change from static scoring to dynamic scoring. Most voters care more about the ballgame score or the book club than about CBO’s long-term projections.
Conclusion: some form of a tax cut is coming.Repatriation is NOT a zero-sum game.
Money moves from a stagnant holding position to a dynamic position. The value of that dynamism is enough to motivate a company to pay a repatriation tax as long as the rate is low. We believe it makes no difference if the rate on repatriation is 8.75%, as in the Brady memo, 10% as in Mnuchin memo or some other low rate. Remember, this rate is being compared against a 35% current corporate rate. What happens with a new and lower corporate rate is another matter. This is one of those devilish details. Tying the historical 35% rate to the repatriation low rate is logical and delivers a large incentive.
Simply put: global businesses that are US based are on notice about $2 trillion.