Tax Reform
How U.S. Companies Would Spend Repatriated Foreign Cash
The goal of this “tax holiday” is to boost domestic investment by providing an incentive to repatriate at least part of the estimated $2.5 trillion that U.S. companies are currently holding abroad. Whether that goal will be achieved remains to be seen though. Similar tax breaks in the past resulted in large-scale stock buybacks rather than a surge in investments, and a 2017 survey by Bank of America Merrill Lynch suggests that we might see similar behavior this time around. As our chart illustrates, paying down debt is the most popular use for repatriated funds. Over the past few years many cash-laden companies have taken on debt in the United States in order to avoid the tax bill that a repatriation of foreign earnings would have entailed. These companies are now looking to pay off some of that debt in light of the interest-rate hikes anticipated for 2018.

Description
This chart shows how U.S. companies plan to use foreign earnings that they could bring back to the U.S. at a reduced tax rate under the new Republican tax bill.