Throughout the recession that began in 2008, businesses have hoarded profits, reluctant to take risks when the economic environment is uncertain. The result is an estimated $2 trillion in liquid assets in the U.S. and possibly as much as $2 trillion overseas. Some of this money remains abroad because corporations want to avoid the 35% capital gains tax on repatriated profits and there is a possibility of tax reform. But capital sitting on the sidelines does little good either for the corporation or for the economy. The InfraBank project proposes to allow corporations to invest at the 15% tax rate, if the money is invested in a five-year InfraBank bond. After five years, both principal and interest would be available, tax-free, as non-reportable income. If demand for 15% bonds exceeded an annual quota — perhaps of $500 billion — the bonds could be sold at Treasury auction.
While allowing corporations to repatriate funds at the 15 versus 35 percent rate would mean a reduction of revenue to the US Treasury, it would bring in more revenue than leaving things as they are — where both the capital and any tax revenue whatsoever is out of the system entirely. And 5 years use of the money for the InfraBank would be at least as valuable to the US economy as the additional tax revenue. It would be no small price to pay for corporations wishing to repatriate profits, but it would at least provide a route to do so that is currently unavailable.