Value Incentive for Repatriation

                It has been widely reported that corporations are sitting on massive profits that are mostly just sitting overseas.  This is not so much a problem as it is a shot in the foot of our recovery as money that could be invested in our country and people, is more or less, floating in foreign accounts.  There are two ways to bring these funds “home” or repatriate them. One doesn’t encourage investment in the recovery, i.e. create jobs, but would bring them “home”.  The other is a value incentive that would almost require job creation and growth.

                It has been argued that a tax incentive to repatriate would cause companies to bring those funds back to American soil and that that money would then be invested in the American economy.  This is only partially true.  A tax incentive would bring said funds back to America but would not likely be added to the economy through job creation and growth but would most likely be used for share repurchases, executive bonuses, and balance sheet bolstering.  None of these things add anything to the economy but rather distort the markets ability to be an accurate reflection of the economy.

                I would argue that the issue with repatriation is that there is no value incentive for companies to repatriate.  What I mean by that is that our currency is, at the moment, more valuable overseas than it is here and if that were to change we would see repatriation of funds, job creation, and growth.  The taboo of this idea is that a value incentive would ultimately mean deflation of the money supply.  I call this a taboo because a deflationary stance would cause a flight from equities into treasuries (risk off).  In other words the market would deflate as well.  Not good for the market. But at the same time companies would, more or less, be forced to invest in American jobs and grow their companies here in order to regain lost earnings that had been drawn out from the market.