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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."
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.
No.
We have TANF(Temporary Assistance for Need Families) and unemployment insurance.
Both are temporary and the first is only for families. The latter is also not available in most states if you quit, are fired for cause, or were not working for more than some amount of time, normally a year.
You know, tax codes need not be written full of loopholes... You need a big helping of corruption -- sorry, lobbying -- to get the mess that the US tax code is.
Though in this case, this is not even a loophole: why would you tax differently US corporations buying US T-Bills and foreign corporations buying US T-Bills ?
The companies doing these shenanigans are not even really avoiding taxes: they are simply delaying them. If the money was to flow back to the US operation, it would be taxed. The problem is that the idiot managers think that avoiding taxes at the cost of investing less is somehow a good idea. Because some moron has decreed that having large amounts of cash is somehow a good idea for a corporation -- it's not, it is a horrble waste of resources.
And of course, it is also bad for society. But this is not really a taxation issue, it is a "people can't count and will cut their noses to spite their faces" issue. And frankly, I don't know how to solve that except by giving significantly more leverage on the board and board salaries to the shareholders.
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
Banned from 4chan again?
Sucks to be you.
Faster! Faster! Faster would be better!
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.
If you can't afford kids...maybe you shouldn't have kids?
And naturally if economic conditions change such that you can no longer afford the kids you had during better days you should sell them to the glue factory.