Barriers to Mobility: The Lockout Effect of U.S. Taxation of Worldwide Corporate Profits

51 Pages Posted: 17 Dec 2008 Last revised: 1 Sep 2010

See all articles by John R. Graham

John R. Graham

Duke University; National Bureau of Economic Research (NBER)

Michelle Hanlon

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Terry J. Shevlin

University of California-Irvine; University of California-Irvine

Date Written: August 25, 2010

Abstract

Using data from a survey of tax executives, we examine the corporate response to the one-time dividends received deduction in the American Jobs Creation Act of 2004. We describe the firms’ reported sources and uses of the cash repatriated and we also examine non-tax costs companies incurred to avoid the repatriation tax prior to the Act. Finally, we examine whether firms would repatriate cash again if a similar Act were to occur in the future. Overall, the evidence is consistent with a substantial lockout effect resulting from the current U.S. policy of taxing the worldwide profits of U.S. multinationals.

Keywords: Repatriation, Tax, American Jobs Creation Act, Homeland Investment Act, Dividends Received Deduction, Trapped Equity, International Tax, Trapped Cash, Section 965, Stimulus, Tax Amnesty

JEL Classification: H20, G32, G38, G35, M40, G15

Suggested Citation

Graham, John Robert and Hanlon, Michelle and Shevlin, Terry J. and Shevlin, Terry J., Barriers to Mobility: The Lockout Effect of U.S. Taxation of Worldwide Corporate Profits (August 25, 2010). Available at SSRN: https://ssrn.com/abstract=1316576 or http://dx.doi.org/10.2139/ssrn.1316576

John Robert Graham

Duke University ( email )

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National Bureau of Economic Research (NBER)

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Michelle Hanlon (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

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Terry J. Shevlin

University of California-Irvine ( email )

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University of California-Irvine ( email )

Paul Merage School of Business
Irvine, CA California 92697-3125
United States
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