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Apple, Google and Microsoft Are Hoarding $464 Billion In Cash (cnn.com)
Apple, Google and Microsoft are sitting on a mountain of cash -- and most of it is stashed far away from the taxman. Those three tech behemoths held a total of $464 billion in cash at the end of last year, according to a Moody's report published this week. From a report: Apple alone had a stunning quarter-trillion dollars of cash thanks to years of gigantic profits and few major acquisitions. That's enough money to buy Netflix three times. It's also more cash than what's sitting on the balance sheet of every major industry except tech and health care. All told, non-financial U.S. companies studied by Moody's hoarded $1.84 trillion of cash at the end of last year. That's up 11% from 2015 and nearly two and a half times the 2008 level. Roughly $1.3 trillion -- 70% of the total -- is being held overseas, where the money isn't subject to U.S. taxes. Apple, Google owner Alphabet, Microsoft, Cisco, and Oracle hold 88% of their cash overseas. Moody's said the tower of money stashed abroad reflects the "negative tax consequences of permanently repatriating money to the U.S."
We have the biggest, most complicated tax code in the history of the universe. We are also the only country that taxes its citizens for income earned while living and working in another country... even after they pay that country's taxes.
This really just demonstrates the stupidity of our current economic system, where money, which is a made-up human construct meant to facilitate the trade in real goods and services, has become more important than said real goods and services. We have a 'market' that pays our best and brightest far more to come up with these pointless number shuffling schemes than to become a doctor, scientist or teacher. We then wonder why, despite all the GDP we have supposedly magiced up in the last decade, many of our doctors, scientists and teachers can no longer afford basic shelter and services for them and their families.
At a government level, we have treasuries slashing public sector spending to provide corporate tax breaks because politicians seem to believe that they can save for the care worker jobs that will be required by the ageing boomers in the future, by putting the young out of work today. Again, all driven by this belief that money is more important than the underlying economy it is meant to facilitate.
And to add to the complete disconnected stupidity, we have central banks busy abusing the monetary system by printing trillions of dollars in an attempt to stop all this warped cash hoarding by the rich from deflating the real economy.
It is really sad, and it is all going to come to a head at some point. Unfortunately I don't think anyone has a clear idea of how to fix it, and there is a great risk that we lurch too far to either the left or right, as has been the pattern throughout history.
I work in Private Equity and have experience with this type of stuff. Honestly in my opinion, there's nothing to see here other than a great case for why the US corporate tax rate should be lower. There are two separate concepts worth discussing. One is money that was MADE offshore and remained offshore, which I don't think anyone should take issue with. That money is used to fund international operations and international acquisitions (and is invested--I recall reading that Apple runs the world's largest hedge fund via its balance sheet cash). No big-wig executive or shareholder benefits from this cash being offshore - in order for them to see any of it, it has to be repatriated, at which point it is subject to US tax. The other concept is money that was made in the US, but is treated as if it was made offshore. The way this works is generally via IP transfer. If a US company transfers its IP to a subsidiary in another country (Ireland is popular, for example), then that US company has to pay royalties to the international subsidiary as it does business. So US Co. makes $100 in search revenue, but has to pay $90 to Ireland Co. for the right to license the IP (oversimplified but that's the gist). $10 gets taxed in the US, and $90 gets taxed in Ireland, the profits remain in those respective countries. Note that when the IP is transferred to the other country, that transaction is taxable - the Irish subsidiary has to "purchase" the IP from the US, which is a taxable event that the US government receives tax income from. However, after the IP is transferred and once operations commence, this becomes frustrating for the US government (and citizens) because money that was made in the US becomes taxed in Ireland. However, even in this case, in order for US executives or shareholders to ever get this cash, the money must be repatriated, at which point it is subject to US tax. So the money ends up just staying offshore, until the company can either negotiate with the US government for more favorable tax treatment, or until it gets used for an offshore purpose. Long story short, if the US corporate tax rate was lower, we would not have this problem. Companies would not transfer IP offshore to achieve more favorable tax structures, they would just keep the money in the US. My personal opinion is that the corporate tax rate that maximizes revenue for the US is much lower than the current 35%.
I think that if they repatriate this money they'll do exactly the same thing financial institutes have done with their cash. Sit on it. They won't "encourage local economic growth". If anything they'll reduce local economic growth by buying up and removing competition. Growth of anyone but themselves is not in their interests.
Personally, I believe that the issue is the USA's tax rates are too high on these companies so they are being encouraged to do business overseas instead of in their home country to shelter themselves from the tax rates in the USA.
Do you honestly believe if the USA's tax rates would be lower that they would pay US taxes? They do what they do because they can, plain and simple.
This is my sig, there are many like it but this one is mine
The worst thing about Ayn Rand is that dumb people latch onto her crazy ideas and think that they are actually rationally sound. Her prose was terrible, but I really like her as a writer, because anytime someone starts talking about Atlas Shrugged I know I can just ignore the person. It's sort of like a big sign that says, 'I am not worth talking to' hanging over their head.
HA! I just wasted some of your bandwidth with a frivolous sig!
Just because you repeat something does not make it true. I have gotten so tired of hearing this oft-repeated line.
The line that corporations are legally bound to maximize profits is complete and utter bullshit.
This is a direct quote from the US Supreme Court: “Modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not.”
Contrary to what you, and every other asshat who repeats this bullshit line, believe, the primary duty of the officers of a corporation is to the best interests of the COMPANY not the shareholders nor the bottom line.
That's it. Don't go reading anything into the above sentence, because the sentence above is the total settled case law in most of the US. The best interests of the company. End of story. Vague.. Yes.. Don't fill in anything in an attempt to make it less vague. It's vague. The Supreme Court has upheld that "responsibility". The only people charged with deciding what to do with that vagueness are the board.