How much money do U.S. corporations have stashed away in their overseas affiliates? The Wall Street Journal estimates $1.7 trillion. That’s enough to pay off President Obama’s deficit for one year.
Is there a way to get it back into the U.S. taxosphere? Not with the current tax ’em higher Senate Majority Leader Harry Reid and House Minority Leader Nancy Pelosi.
A tax holiday on repatriating cash held overseas isn’t going to cut it. That’s because outfits like Google, Microsoft and EMC Corp. keep more than three-fourths of their foreign subsidiaries’ money in U.S. banks. It saves them the agony of the discount defeat on the foreign exchange market. If China can buy U.S. Treasury bonds then foreign affiliates of U.S. companies can stash their cash in U.S. banks. That’s the beauty of a free and open market.
As noted by A Senate Subcommittee on Investigations in 2011, “The presence of those funds in the U.S. undermines the argument that undistributed accumulated foreign earnings are trapped abroad.”
Despite this dig the funds banked in the U.S. by foreign affiliates of U.S. corporations remain foreign funds under U.S tax law. And they will stay trapped there until this country decides to reduce the absurdly high 35 percent corporate tax rate. Cut it in half and eliminate all tax allowances and loopholes such as accelerated depreciation. Cut it in half again for repatriating cash from foreign affiliates. The benefit to the economy will be higher dividend payments to stock holders and stock buy-backs to increase the value of the U.S. stocks.
We may not get the whole $1.7 trillion, but there will be enough cash to goose the private enterprise economy and the government’s tax coffers.
Last year United Technologies Corp. brought home $4 billion of its foreign funds to buy Goodrich Corp.
That’s not the only source of cash to enliven the economy. The Associated Press reported that nationwide private property owners have raked in about $21 billion in natural gas royalties in 2010. In Pennsylvania alone, in 2012, the total is $1.2 billion. That’s saving some farmers.
The biggest state for natural gas royalty payments is Texas at $6.7 billion.
Pennsylvania sets the royalty payments at 12.5 percent, but nationally the average is 18.75.
Horizontal drilling and shale fracturing thousands of feet below the surface and below the water table have produced a 3.1 percent unemployment rate in North Dakota and average wages in the oil industry in 2011 at $91,400 compared to the state average of $41,800, according to Wall Street Journal figures.
A New York Times story Monday noted that California’s Monterey Shale formation in Southern California covering 1,750 square miles “could turn California into the nation’s top oil-producing state …”
The shale if 6,000-15,000 feet deep, compared to typical Southern California oil fields 2,000 feet below the surface. The Monterey shale formation is estimated at 15.4 billion barrels, which the U.S. Energy Information Administration pegs as four times the reserves of the Bakken Formation in North Dakota.
California is in the process of creating regulations for shale fracturing. Let’s hope this process looks to what other states more experienced at regulating oil and gas fracking do rather than let the environmentalist reactionaries hijack the process. As the Legislature is looking to reform the environmental impact process it should keep shale oil drilling regulation from being another economy killer.
Shale oil in California could be a game changer for a state that is losing people and jobs to Texas, Arizona and Nevada.
That’s where the money is. It is in plain sight. Foreign affiliates of U.S. corporations have it stashed in U.S. banks. Releasing that money is easier than releasing oil from the Monterey Shale Formation. Both will help the economy if approached in a reasonable and responsible way.