no matter the outcome of<u+00a0>tuesday<u+2019>s<u+00a0>election, american companies with substantial overseas earnings, and their investors, could emerge as big winners. corporate tax reform that would make it easier for u.s. firms to repatriate foreign earnings has emerged as a rare issue of bipartisan consensus in washington. progress on this issue is possible no matter who controls the white house and congress next year. investors in big, widely held companies like apple inc. would stand to benefit. under current law, american companies with overseas earnings pay no u.s. federal tax on these profits unless and until they repatriate the money, at which time they pay the relatively high corporate tax rate of 35%. this creates a perverse incentive for u.s. companies to house money abroad rather than reinvest it at home. republican candidate donald trump has proposed that past earnings stashed abroad could be repatriated at a special rate of just 10%. republicans in the house of representatives have an even more generous proposal that would allow repatriation of accumulated foreign earnings at a rate of just 3.5% to 8.75%. they would also change the basis of tax law such that much revenue earned overseas wouldn<u+2019>t be taxed at all going forward. hillary clinton hasn<u+2019>t made any specific proposals on how to tax overseas earnings. nonetheless, there is substantial scope for bipartisan agreement on this issue. president barack obama <u+2019>s recent budget proposals called for a special rate of 14% on repatriated earnings, and a new, lower tax rate of 19% on foreign earnings thereafter,<u+00a0>even if they aren<u+2019>t repatriated. even in a divided-government scenario, for example with mrs. clinton as president and a republican-controlled congress, it seems likely that companies can look forward to a one-time break on repatriated earnings and a lower tax rate on foreign earnings going forward. the last time there was such a repatriation tax holiday was in a law passed in 2004, and the effects were dramatic. companies brought home $299 billion of overseas earnings in 2005, up from $82 billion the previous year, according to the bureau of economic analysis. that level hasn<u+2019>t been reached in any year since. the 2004 law contained language trying to prevent that money from being used to buy back company shares . but money is inherently fungible, and it appears that a substantial portion of the funds went to buybacks, which surged by 58% in 2005, according to goldman sachs. a similar tax holiday now, and a settlement on how to treat foreign earnings in the future, would disproportionately benefit american companies with big global operations. this includes technology companies like apple, which has $92 billion of earnings invested overseas and gets almost two-thirds of its revenue from outside the u.s., according to goldman. general electric has $104 billion stashed abroad and derives 55% of sales from overseas. other likely winners include oil majors like exxon mobil corp. and consumer giants like pepsico . it has been a long and dispiriting campaign season. but, as it draws to a close, investors in some of america<u+2019>s top companies can look forward to at least one positive outcome.
these u.s. companies to benefit whoever wins<u+00a0>tuesday  - wsj
aaron back