U.S. Corporate Overseas Cash Grows

U.S. corporate cash balances held overseas have reached $2.1 trillion, a 600 percent increase over the past 12 years. In comparison, the domestic U.S. corporate cash balance is $1.9 trillion. The major reason for the growth in international cash balances is the U.S. tax policy that taxes repatriated profits at the difference between the local tax rate already paid and the U.S. corporate tax rate, which is one of the highest in the world. Repatriating overseas cash does not necessarily mean the cash will be used for investment. One study indicates during the 2004 tax holiday, every dollar repatriated generated an $0.80 dividend payment and $0.15 share repurchase. While politicians may decry the lost corporate tax revenue that arises with a repatriation tax holiday, personal income taxes balloon with the increased dividends and share repurchases.