How will Trump's tax plan succeed when Bush's in 2004 failed?

A BIG reason why Wall Street has risen to all-time highs is the promise of a "phenomenal" tax plan by US President Donald Trump. However, other than that promise, which was made more than a week ago, no details have been forthcoming though much of the speculation has centred on a proposal to give US companies a tax incentive to repatriate their profits instead of keeping the money offshore. The current US corporate tax rate is 35 per cent, which is one of the highest in the world. So hopes are that if the new administration were to offer a major concession, say a rate of 5 per cent, US firms will bring their money home, thus boosting investment and creating jobs (don't forget Mr Trump's other promise of creating 25 million new jobs).

It all sounds good on paper, but it appears that markets have a very short memory. Few readers might remember this, but the Bush administration in 2004 passed the American Jobs Creation Act (AJCA), which permitted US corporations to repatriate income held outside the country at a tax rate of 5.25 per cent instead of 35 per cent. The purpose was "to encourage companies to return cash assets to the United States, which proponents of the AJCA argued would spur increased domestic investment and US jobs".

How successful was this move? In 2011, the US Senate's Permanent Subcommitee on Investigations reported that "in response, corporations returned US$312 billion in qualified repatriation dollars to the US and avoided an estimated US$3.3 billion in tax payments, but the growth in American jobs and investment that was supposed to follow did not occur". The investigation found that more jobs were actually lost than gained (the top 15 repatriating companies reduced their overall US workforces by 20,931 jobs, while studies of all 840 companies found no evidence of more jobs).