Create a 10-percent repatriation tax

"It (The Donald J. Trump tax plan) will provide a deemed repatriation of corporate profits held offshore at a one-time tax rate of 10 percent."

Subjects: Taxes


One-time deal for companies to bring overseas money home still on Trump's agenda

As a presidential candidate, Donald Trump proposed creating a one-time tax for "repatriating" income held in foreign countries by United States companies. In his fiscal 2018 budget proposal, Trump reiterated that that's still his plan.

What does this mean? As the Urban Institute-Brookings Institution Tax Policy Center explains it, there are two types of tax systems -- territorial and worldwide. Generally speaking, a territorial system would tax all income earned from investments within the United States but exempt income from investments outside the United States. By contrast, a worldwide system would tax all income regardless of where it was generated.

Currently, the United States has what the Tax Policy Center calls a hybrid system, with aspects of both. Without getting too far into the weeds, companies are currently able to avoid U.S. taxes by keeping income they earn with foreign subsidiaries in overseas accounts. Once that money is brought home, or "repatriated," it is taxable at the full U.S. corporate tax rate, adjusted to give a credit for any foreign taxes already paid.

The result is that the current system "effectively exempts a significant share of foreign profits," the Tax Policy Center says.

Trump's plan would allow these companies to bring that overseas money back home all at once, with a special, lower-than-usual tax rate.

In his budget proposal, Trump pledged to "end the penalty on American businesses by transitioning to a territorial system of taxation, enabling these businesses to repatriate their newly earned overseas profits without incurring additional taxes. This transition would include a one-time repatriation tax on already accumulated overseas income."

This mention clearly reiterates Trump's support for the idea, minus the specificity of the 10 percent figure cited during the campaign.

Still, there is no actual tax legislation yet to carry out Trump's priorities, and Congress will have to pass measures before Trump can sign them into law. Still, his decision to mention the proposal in the budget document moves this promise to In the Works.


White House, fiscal 2018 budget proposal, May 23, 2017

Urban Institute-Brookings Institution Tax Policy Center, "Is a Territorial Tax System Viable for the United States?" March 28, 2017

Email interview with Roberton Williams, fellow at the Urban Institute-Brookings Institution Tax Policy Center, May 24, 2017