Donald Trump has spoken repeatedly at the first presidential debate about the desperate need to rebuild U.S. infrastructure. To do this, he says, he wants to get ahold of the almost $2.5 trillion in U.S. corporate profits currently being held overseas. (Trump claimed with no evidence that the amount is actually more like $5 trillion.)
This build up in U.S. corporate profits held in foreign countries is caused by a weird loophole in tax law: The U.S. corporate tax rate is 35 percent, but multinational companies don’t have to pay taxes on profits earned in foreign countries until they bring it back to the U.S. They therefore have held those trillions hostage, hoping that eventually Americans will be so desperate for government funds that they’ll agree to a deal that slashes the tax rate.
That’s what Trump is promising to deliver. His tax plan, as he proudly said tonight, would cut the corporate tax rate from 35 percent to 15 percent on U.S. profits — and to even less, 10 percent, on overseas profits.
Under the current tax rate, corporations would pay $875 billion in total taxes on $2.5 trillion in overseas profits. Under Trump’s, they’d pay $250 billion. So his plan would save multinational corporations $625 billion.
Even worse, having a significantly lower corporate tax rate for overseas profits would create an enormous incentive for U.S. multinational corporations to move as much of their operations as possible to foreign countries. It would also be a giant disadvantage for countries that only operate in the U.S.
During Hillary Clinton’s campaign she’s hinted at supporting some kind of similar corporate tax deal, but with no specifics.