My book Perpetuating Greatness After The Fiscal Cliff introduces Jump Start America Bonds. The proposed changes in the federal corporate income tax and estate tax laws which would make the sale of Jump Start America Bonds possible would create the perfect economic stimulus. Why do I reach that conclusion?
1. The sale of Jump Start America Bonds to finance shovel ready state transportation construction projects will create hundreds of thousands of tax-paying jobs and help the middle class.
2. By investing in Jump Start America Bonds corporations will be able to repatriate to the US billions of dollars of cash held offshore for tax reasons at highly discounted tax rates and without risk of loss. If they prefer they can treat the investment in Jump Start America Bonds as remaining offshore and only pay a repatriation tax on the interest received.
3. Corporations will also be able to STEP UP and promote the economic stimulus by floating their own bond issues at the currently low rates and use the proceeds to invest in Jump Start America Bonds. Corporations will profit from the interest rate spread and will be able to use the proceeds from the Jump Start America Bonds to repay their bonds when the principal becomes due.
5. Wealthy individuals will be able to STEP UP and purchase Jump Start America Bonds bearing tax exempt interest and without risk of loss from interest rate increases or investment loss (like previously issued “Flower Bonds”) by using the bonds to pay federal estate taxes.
6. A corporation providing the principle portion of the funding of a bridge or tunnel will acquire naming rights during the term of the Jump Start America Bonds which finance the project.
7. The Jump Start America Bonds will be transferrable.
8. Our debt laden states will be able to finance their needed transportation projects on favorable terms.
9. The federal government will see a serge in tax revenues from the taxes which will be paid (even at reduced rates) from the repatriation of offshore profits and from the income taxes payable by the contractors building the construction projects and their employees. Welfare and unemployment benefits will decline. The federal deficit and the rate of growth of the National Debt will be reduced.
10. The multiplier effect will create tens of thousands of additional jobs and generate billions of additional federal and state income tax revenues.
11. The housing market will benefit from the creation of middle class jobs and economic growth.
12. The federal government will generate the economic stimulus with no cash outlays.
13. Accepting the Jump Start America Bonds if they are tendered in payment of corporate or estate taxes will act much like QE. The Jump start America Bonds will ultimately be converted into cash when they mature.