I will start with a disclosure that I am fine with lowering the corporate income tax rates. Repatriation of profits is a viable argument. That said...expecting it to directly correlate into capital investments, hiring or increased employee pay or benefits...is unlikely.
Corporate Income Taxes are paid post expenses. Meaning, if the company makes 1 million, but spends 999,999 in operating expenses, licensing, capital expenditures (read...new facilities/equipment), etc...they only pay taxes on $1.
Granted, I'm grossly oversimplifying this. But, it is merely to clearly and plainly illustrate the point. The reason a company doesn't just operate without a profit margin, be they private or public, is pressure from investors. Investors only make their monies through realization of profit. The immediate impact of lowering the corporate tax rates will be putting money into their pockets. The net result would bolster stock performance and dividends.
Now, that sounds terrible (to some) because...rich fat cats, and all that. But, it really isn't. A large percentage of investments are held through funds that are relied upon by millions upon millions of people, not just the "top one percent". Retirement funds, for example. These are called Institutional Holdings. Disney's DIS stock (NASDAQ), after a quick check, is ~63% held by these sort of investors. The dividends of these stocks are then distributed amongst their clients, in the case of investment groups and banks, and/or to stabilize cash reserves, in the case of insurance companies.
The largest institutional holder for DIS, for example, is Vanguard Group. Vanguard specializes in all sorts of financial planning for individuals and institutions, one of which, for example, being Duke University's Retirement Fund through Vanguards Target Retirement Fund. Another large holder of DIS stock is State Farm Mutual Auto Insurance Group.
These are just two examples, amongst the ~1200 Institutional Holders of DIS stock, but I think it illustrates enough for me to point out that it isn't all just going to the "rich"...Not by a long shot.
So, that is the immediate economic impact. Bolstering of the stock market.
Now, from there, one of a two things can happen.
1) The company decides to continue the higher dividend payouts, and leave operating expenses as is.
2) The company decides to keep their dividend percentages the same as before, and increase operating expenses
Honestly, #1 is far more likely.
But, that doesn't mean that the further impact, repatriation of funds, doesn't have an effect on the real wages of employees or future capital investments. It just, very likely, won't be direct.
I'll explain how.
Currently companies, once they reach a certain size, spend a lot of time and money keeping revenues isolated away from the US, using subsidiaries, etc. They do this to avoid the higher US taxes. So, you can't simply set up a company in, say, Ireland, and then funnel money through it. That would be tax evasion, that would be illegal. But, you can set up some sort of business unit that produces something of value, for the consumer or the company, and then redirect income through it.
This employes people there, and monies are kept in local banks and investment firms, etc...which is then reinvested (by those local banks) in the local economy there, and the employee salaries spent to bolster that local economy.
And, that is what they do.
The incentive to do this, though, lay strictly to please the investor. A savings in tax can lead to a increase in dividends and stock value. And, to a CEO, that is their primary goal. To create value for the investors. Note...not the consumers. The investors.
So, the argument is...if US based corporations are presented with the option to pay the same (or lower) rate of tax without having to jump through international means, they will, potentially, keep the funds in the US, and expand those business units here.
If they do so, this leads to an indirect impact on the US economy as a whole. The increased dividends go to US based investment and financial institutions and insurance companies. These funds have a direct impact on US local markets, through loans, insurance rates, etc. And, these, have a direct, but distributed, impact on the US based economy. And, the wages, if paid to US employees, are spent largely within our economy, or deposited in local banks which, in turn, invest locally. When the funds are kept overseas, they do not.
As I said at the beginning...not direct. But, indirect.
Critics are not wrong to say this is "trickle down"...that is exactly, when grossly oversimplified, what it is. The question is...does it work?
