Republicans love cutting taxes. And now that they are in charge of the White House and the Congress, tax reform—especially business tax reform—is number two on the agenda (after Obamacare). One provision of forthcoming tax reform is likely to include incentives for corporations to bring home the trillions of assets they have stashed overseas while waiting for lower tax rates to be enacted here at home. The question is whether corporations will get a free ride, or instead be required to use a portion of the funds they repatriate to invest in the future of the United States.
History is instructive—and discouraging. When Congress enacted a tax holiday in 2004 that allowed corporations to bring overseas assets back home at a rate of roughly five percent, the firms that availed themselves of this provision cut U.S. jobs and reduced spending on research and development while increasing their spending on stock buybacks and executive compensation. Critics of this policy ranged from liberal groups to the conservative Heritage Foundation.