The Tax Cuts and Jobs was supposed to remove the barriers for U.S firms to bring profits held overseas back home, enabling them to invest more heavily in the domestic economy. While there was a clear jump in payments made by overseas affiliates to their U.S. parent companies in 2018, at least on paper, Brad Setser of the Council on Foreign Relations said Wednesday that data from the first quarter of 2019 indicates that “U.S. firms have resumed reinvesting a decent chunk of their offshore earnings abroad.”
Overall, there is no evidence that Trump’s tax law spurred U.S. firms to bring intellectual property back home, Setser said, which suggests that the associated profits will continue to flow to overseas affiliates. And one of the big claims made to support the tax legalization – that profits were being held offshore because the U.S. tax system was so punitive – is looking pretty weak. “[T]he notion that firms were so burdened by US tax that they were forced to hold sums offshore that they would quickly repatriate hasn't been born out in the data,” Setser wrote.
