AP FACT CHECK: Trump And The Mirage Of Overseas Profits

President Donald Trump talks with reporters as he departs from the South Lawn of the White House via Marine One in Washington, Saturday, Dec. 16, 2017, to spend the weekend at Camp David in Maryland. (AP Photo/Susan Walsh)

WASHINGTON — President Donald Trump speaks often of a pile of money sitting overseas that will come rushing back into the U.S. once his tax plan is in place. That’s something of a mirage.

Here’s what he told reporters Saturday in the roar of Marine One waiting to take him to Camp David, Maryland:

TRUMP, asked about the $20 trillion U.S. debt and his tax overhaul’s effect on it: “Well this is going to bring money in. As an example, $4 trillion will come flowing back into the country. That’s money that’s been stuck overseas for years and years.”

THE FACTS: First, his comment should not be read to mean that the debt is going to shrink by $4 trillion because of money returning from abroad. That’s not possible.

Second, $4 trillion is a generous estimate of the money that might return. He’s referring to profits that U.S. companies have been parking overseas to avoid the higher U.S. corporate tax. The lowering of that rate is bound to result in some of those profits coming back to the U.S. That could be in the ballpark of $2.5 trillion, perhaps more. But low taxes on those profits mean repatriation won’t bring much relief to a debt forecast to swell from his tax cuts.

Third, history does not suggest that repatriated profits will make much difference to the economy.

A 2004 law temporarily cut taxes on repatriated profits to 5.25 percent from 35 percent. That prompted 843 companies to bring back $312 billion. But those companies tended to use the money to buy back shares of their own stock, not to hire or expand operations.

A 2011 Congressional Research Service report found that the tax holiday “did not increase domestic investment or employment.”

By CALVIN WOODWARD - Dec 17. AP

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Associated Press writers Josh Boak and Paul Wiseman contributed to this report.

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Find AP Fact Checks at https://apnews.com/tag/APFactCheck

 
 

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