Contributing to the generation of knowledge

While U.S. tax policy allows U.S. multinational corporations to defer tax on foreign earnings until they bring the cash back home, most corporations never bring it back because they could be taxed up to 35 percent. Instead, U.S. corporations hold an estimated $2.1 trillion in foreign profits overseas rather than investing it in the U.S. economy.

Assistant Professor Kevin Markle, his Duke University colleague Scott Dyreng, and Iowa PhD student Jon Medrano are examining the repatriation choices the few corporations make when they bring money back to the United States.

“What will they do with it in the U.S. once it’s here?” Markle asks. “People on both sides of the issue claim to know exactly what would happen if we have tax reform or stay where we are. But we really don’t know why some firms bring the money back. Why is it so costly? Why are some companies doing it? Have they figured out how to do it for less cost? And when they bring it back, what are they doing with the money?”

A PhD seminar initiated this research collaboration when Jon turned in a research proposal. Markle was surprised to find that Jon was asking the same question that launched his own research. Now Jon is taking the lead on processing the data to discover how corporations spend their repatriations.

Markle says Iowa’s nationally acclaimed PhD accounting program is like a research apprenticeship where students contribute to the generation of knowledge.

"We’re answering these questions in rigorous and meaningful ways.”

“There’s a lot that we think we know but don’t know empirically about what companies do,” Markle says. “Do Americans evade taxes? Most people would say, ‘Of course, they do.’ But who does and how much? We could speculate, but the truth is, we actually don’t know. We’re answering these questions in rigorous and meaningful ways.”