Making the Case for Corporate Tax Reform

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Dec. 19 (Bloomberg) –- Harvard Business School’s Robert Pozen discusses how to bring overseas profits back to the U.S. with Pimm Fox on Bloomberg Television’s “Taking Stock.” (Source: Bloomberg)

A senior research fellow from the brookings institute.

Tell us about the money held by u.s. companies that is a missile outside the united states.

-- that is domiciled outside the audit states.

Large companies make most of their profits, quite a bit of their profits overseas.

They are theoretically sets the -- subject to a 35% tax but they don't have to pay any tax unless they bring the money back to the u.s.. as a practical result, $2 trillion is overseas and not coming back to the u.s. that $2 trillion is not building plants in the u.s., not paying dividends to u.s. shareholders, and not helping them acquire u.s. companies.

Moreover, it's not raising any tax revenues for the irs because the money isn't coming back.

We need to solve this problem and figure out a way to stop encouraging that money to stay abroad.

How did this start?

How did this tax rule and upcoming into being?

It's a historical anomaly -- historical anomaly when they had this theoretical tax and they said you could do for it.

But now deferral has become permanent.

As long as you keep the money abroad, it is indefinitely deferred.

That's why we have close to $2 trillion overseas that's not really helping anybody.

Had there been serious proposals and washing and to bring the money back rushing mark --? there are two proposals but two camps that are very far apart.

What is the people in the business community who want to bring it back at 5% or 6% and have a tax holiday like we did in 2004 under president george bush.

Most people say we can't do that again.

We are not exceeding the system grade it's a temporary thing and the rate is too low.

You liberal democrats want to tax it now and 35% and people say that's too high.

These people reasonably relied on the rules.

My proposal is an intermediate proposal.

What is the average marginal effect of the tax rate in the advanced industrial society.

It turns out to be 17%. if you're making profits overseas, and you are taxed at 17% or more, the company should be able to move the money freely wherever it wants, including act to the u.s. without taking any tax.

But if you're making profits in a tax haven like the cave and the -- like the cayman islands or bermuda and your only paying 2% tax, no more deferral, we will charge you right away the difference between a 17% and 2%, which is 15%. this would encourage companies that are doing business in real european and asian companies, not tax havens, to free up their money and bring it back to the u.s. at the same time, it would discourage these companies from

This text has been automatically generated. It may not be 100% accurate.

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