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Tech Firms Keep Piles of 'Foreign Cash' In US
theodp writes "There's a funny thing about the estimated $1.7 trillion that American companies say they have indefinitely invested overseas,' reports the WSJ's Kate Linebaugh (reg. or the old Google trick). 'A lot of it is actually sitting right here at home.' And if tech companies like Google and Microsoft want to keep more than three-quarters of the cash owned by their foreign subsidiaries at U.S. banks, held in U.S. dollars or parked in U.S. government and corporate securities, Linebaugh explains, this money is still overseas in the eyes of the IRS and isn't taxed as long as it doesn't flow back to the U.S. parent company. Helping corporations avoid the need to tap their foreign-held cash are low interest rates at home, which have allowed U.S. companies to borrow cheaply. Oracle, for instance, raised $5 billion last year, paying an interest rate roughly two-thirds of a percentage point above the low post-crash Treasury yield, about 2.5% at the time (by contrast, grad students and parents pay 6.8%-7.9% for Federal student loans). Were the funds it manages to keep in the hands of its foreign subsidiaries brought home and subjected to U.S. income tax, Oracle estimated it could owe Uncle Sam about $6.3 billion."
time for a outsouring tax?
Be for long we will need a way to pay for all people in the USA not working.
Raise taxes and those taxed will find legals ways to avoid them. Ways that the morons in Congress never anticipated.
To paraphrase Princess Leia, "The more you tighten your grip, Harry, the more tax dollars will slip through your fingers."
When Fascism comes to America, it will call itself Anti-Fascism, and tell you to give up your guns.
It sounds to me like they are using their foreign profits like a 401k, keeping them in accessible until they need them, and then paying tax on them when they do.
I don't have a problem with Oracle paying more taxes. The "fix" though seems to be that in charging them for any foreign assets on shore that we simply create the pressure that causes them to leave their foreign profits overseas. By letting them use these profits as collateral for loans, we get billions of extra dollars sitting on our banks allowing those banks to give out cheaper loans to the rest of us.
Whether or not Oracle deserves a tax-deferred-savings account like mine, the fix of pushing the money back overseas, seems worse than the illness.
Inflation does not depend on the amount of money in the system. It depends on the amount of money people get to spend. Whether you have large sums in a foreign bank, or a US bank, doing nothing means this money can cause no inflation. In fact, the FED trebled the money supply in those last years, and the US is still in quasi-deflation...
Why would you compare the interest rate that Oracle can borrow money at with an average college student whose family does not have enough funds to pay for college themselves? Oracle has over $30 billion in cash reserves, so they are a much safer bet to lend $5 billion than a college student who can't scrape together $100k.
Do people honestly think banks should lend money with rates based on how sympathetic the borrower is?
-- All that is necessary for the triumph of evil is that good men do nothing. -- Edmund Burke
I've been saying for years that we need to go back to Ronald Reagan's 1986 Tax Reform act. We could tax capital gains as regualr income, and do away with corporate tax altogether. That would eliminate the entire discussion. All sides of the debate would have to STFU since they got what they wanted. And there wouldn't be any more of this off-shoring and subsidiaries for tax purposes. It wouldn't matter how CxO's take their pay, because they will still be taxed - the same as everyone else. It wouldn't matter any more how the books get moved around. And the Occupy types wouldn't have anything more to bitch about. The only ones who would get truly shafted would be the greedy.
C|N>K
The main reason corporation are doing this is that they are hoping for an overseas earnings tax holiday.
Unfortunately it's not a wish upon a star. Such a holiday has been granted before, in 2004. So it is a perfectly logical strategy to hold out as long as possible in hopes of getting another cookie.
There is actual evidence that the last tax holiday led to job cuts as well.
Considering that we are in a liquidity trap now there is certainly no rational expectation that a repatriation tax holiday will benefit anyone except perhaps the stockholders of these corporations.
Such tax holidays are extremely bad policy for a variety of reasons. Which means I guess it's going to happen.
In reality what is needed is an overhaul of the tax system which includes reducing the top rate and elimination of many loopholes. Of course this is beyond the ability of our completely dysfunctional Congress. But the benefits to the economy would be massive.
We need a use it or lose it tax.
Not really. We have a dog's breakfast of programs that provide food subsidies, housing subsidies, subsidies for mothers with children they can't support, free cell phones, unemployment benefits, medical subsides, and disability subsidies.
The system is so crazy that we have parents actually encouraging their kids to BE crazy so they can receive more money.
But by gaming the system a person can do pretty well. A single mother with two kids making $29,000/year receives net income and benefits of over $57,000. Earning more income actually results in a net decrease in total income+benefits -- this is the "welfare cliff".
Whether or not Oracle deserves a tax-deferred-savings account like mine, the fix of pushing the money back overseas, seems worse than the illness.
Yes but this calm, rational, mature, objective point of view doesn't provide the visceral "satisfaction" of punishing people who are easily demonized and easy (often with reason) to hate. So politically, it doesn't sell very well. It doesn't appeal at a base level to the masses who vote emotionally instead of taking the time to recognize certain cause-and-effect relationships.
Politics should be about how to best manage a nation, not what it's become now, which is how to ineffectively resolve one's discontentment with life by trusting liars who don't give a damn about you.
It is a miracle that curiosity survives formal education. - Einstein
In a senario like that the wealthy would be safe, because they could afford a private police force. They middle class neighborhoods would be safe, because they as a whole (neighborhoods setup with stuff like HOAs) could afford a private police force. Poor neighborhoods would be more than likely ran by some sort of gang (a lot are even now).
"Ubuntu" -- an African word, meaning "Slackware is too hard for me". - stolen from Dan C alt.os.linux.slackware
People try to maximize their well being. People respond to incentives. If you give them perverse incentives, they respond perversely. Companies, in that respect, act like people, except that it's the executives and board of directors working to maximize their and their shareholders' well being. So who is surprised when companies respond perversely to perverse incentives? If you want companies to act sanely about money, you have to stop forcing them to comply with insane rules. (The several suggestions in this comment section to add more insane rules would just result in a different insane corporate behavior.)
-- Two men say they're Jesus. One of them must be wrong. - Dire Straits
Seems like what the US needs is an alternative minimum tax for corporations doing business in the states. If I have to pay, so should they.
Rich people consume much less than poor people. They wouldn't be rich if they spent their money. Most money is invested to make more money.
"Stealing" imaginary property, doing copies for no profit or private use: Lawsuits for hundreds to millons of dollars, or years in prison
Actually stealing billons of dollars in taxes: no consequences
Putting world economy at stake: bailout
Clearly we got it wrong. Stealing is not the wrong thing, just doing in small to zero scale does.
1) Policies that allow children to starve in the streets of one of the wealthiest nations of the world are uncompassionate and unconscionable.
2) Policies that have a net effect of subsidizing the production of babies within the poor class are unscalable and unmaintainable in the long run.
Both of these facts are true, and the most natural responses to them directly contradict one another. You cannot address the pain recognized by one fact without causing the pain of the other.
People tend to harp on one or the other, and each camp has a perfectly justifiable criticism of the other camp. Proponents of both camps will feel completely justified by sound logic, and they are both right.
Any possible middle ground will involve some kind of egregious injustice. There is no way to resolve this situation without leaving someone very justifiably pissed off. You can let the poor starve (watch them turn to crime and feel justified by it), you can give them all the free money they need (watch the earners scream about having what they have earned taken from them to feed parasites, justifiably, and watch the population among the poor explode to unmaintainable levels), you can impose limitations on reproductive rights (watch EVERYONE scream about this and enforcement will be a nightmare), you can claim the babies as wards of the state (hah...yeah that will fly). Maybe you have some other ideas? Post them, so the fact that they will not work can be exposed.