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3.) I'll take that position. Tax repatriation holiday please! Money is only useful at a macro scale if it's in motion. These cash reserves are worthless if the

3.) I'll take that position. Tax repatriation holiday please! Money is only useful at a macro scale if it's in motion. These cash reserves are worthless if they just accumulate. Better to take them back into the US, and be distributed as dividends to shareholders or through buy backs than to leave them. If that money could be invested internationally it would, and so basically the mere fact that the money is sitting idle in the bahamas is a huge vote of no-confidence in the other economies of the world. Every once and a while you used to see the big companies buy stupid expensive office space in London and other European/asian cities that were experiencing real estate growth. We see that less now probably because they are already well allocated in that asset class. Now you may be thinking, well if it's better to take the money home then leave it sitting there for a decade, consider the following. If you repatriate the money and pay anywhere near the 35% corporate tax rate to do so you have to invest it in the US for at least 5 years with a 10% rate of return before you get back to what you had held internationally. Outside the fact that this is basically impossible to do with hundreds of billions of dollars... Absolutely no quarterly venture (wall street) is going to be allowed to do that, they will be sued into oblivion by their shareholders just for trying. Especially since the US regularly holds repatriation holidays. The only tenable long-term solution to this problem is to not tax corporate earnings from overseas. Tax them through individuals later, but not the corps. Otherwise Apple could exist in one form or another for 100 years with 100s billions of dollars just sitting overseas. Of course people who don't understand economics will argue that this is defrauding the US gov't of legitimate tax revenue, but my argument is the US is not the jurisdiction in which this money was earned, so it should see none of it.

Retric 10y ago
Tax holiday's are a terrible waste. Just tax foreign holdings at say 3% per year as an AMT and suddenly all that money starts flowing again.
- guimarin 10y ago
  I don't see why I would pay 35% of my holdings to avoid having to pay 3%. Also your plan is impossible because it's not Apple or Facebook or Google the US listed entities that own this money, it's independent country specific subsidiaries. The US Gov't has no territorial claim on their asset reserves. The fact that the big companies report the money as their own is a GAAP sleight of hand that everyone knows already understands both sides of in the marketplace.
  - Retric 10y ago
    3% * 10 years = 30%, wait 20 years and well you get the idea. The point is by keeping large foreign holdings you simply gain an ever larger tax burden until you need to bring money back to pay it off. After all foerein holdings are not a problem the problem is the unlimited tax dodge until tax holiday. Also, the ability for companies to have subsidiary's as separate entity's is all down to law and can change at any time. US courts regularly https://en.m.wikipedia.org/wiki/Piercing_the_corporate_veil https://en.m.wikipedia.org/wiki/Piercing_the_corporate_veil
    - thaumasiotes 10y ago
      3% * 10 years is 26%, not 30%. And later payments are better than earlier payments even when they're numerically equal.
      - zht 10y ago
        why is 3% for 10 years 26%?
        Nullabillity 10y ago
        You're thinking 3% of the original amount, rather than 3% of the remaining amount. If you pay 3% then 97% remains. 0.97^10≃0.74, meaning that you've lost 26%.
      - Retric 10y ago
        That's assuming zero interest. 3% ROI + 3% tax over 20 years... Also, the idea is an AMT tax if you pay 3 million in US taxes and keep 100 million untaxed offshore that's no additional taxes. Next year if you add another 100 million (200m total) your US taxes also increase by another 3 million. So you might as well bring back enough that you would have paid 3 million in extra taxes so 200m - 3/.35 = 191.4m off shore and 8.6m brought back. After a few years your foreign untaxed accounts stop growing as you bring back as much as your making. Same basic math would also apply with 5% or 1% AMT tax rate, the difference is how large the foreign reserves get. PS: Ok, now the downside. It's really hard to parse though untaxed profits of subsidiary's. But, companies like Google are going to stick with legal methods of dodging taxes.
- AnthonyMouse 10y ago
  > Just tax foreign holdings at say 3% per year as an AMT and suddenly all that money starts flowing again. Now you have one of two problems. If the 3% goes against only cash and not other assets then it's completely ineffective, because they can just hold the money in whatever type of assets aren't included. But if it does include all foreign assets then US companies can no longer do business in foreign countries, because they won't be competitive with local companies that don't have to pay the same recurring tax on the plant and equipment and other business assets needed to operate there.
mdorazio 10y ago
I think you missed the point of my #3. This is like the underpants gnomes in South Park: Step 1: Tax-free repatriation Step 2: ???? Step 3: Economic pizza party What is step 2 here? Is there any actual evidence that repatriated funds would go back to productive things in the US economy? When we had a tax holiday in 2004, it was a complete failure for jobs and development [1], and only helped shareholders and executives. Is that really what we want? For that matter, is there even a guarantee that companies would distribute all the money back to shareholders in a way that would lead to personal income tax? Your argument that the money is not being spent overseas implies lack of confidence in other economies is exactly what I'm saying - there is no productive use of those funds available, or else the holders would already be spending it. I would personally much rather some portion of that money go back to the government for expenditure directly on public projects than have all of it go who knows where when it gets repatriated. I and may other people opposed to tax-free repatriation are perfectly aware of the economics and simply disagree with you on desired outcomes. My opinion is that if you don't want to pay US taxes, don't do business in the US. If you want the benefits of the US labor force, infrastructure, education, legal and military protection, etc. then you should be willing to pay taxes to enjoy those benefits. What other countries do or do not do is irrelevant, as are the desires of necessarily selfish investors. I also disagree that tax-free repatriation is the only long-term solution available - it's just the one you personally like the most. For example, there's nothing stopping Congress from enacting laws to tax stockpiled funds. [1] http://www.wsj.com/articles/SB10001424052970203633104576623771022129888 http://www.wsj.com/articles/SB100014240529702036331045766237...
- sigzero 10y ago
  >My opinion is that if you don't want to pay US taxes, don't do business in the US. The do business in the US and they pay taxes on the business they do in the US. The US tax laws are absurd on this issue. > there's nothing stopping Congress from enacting laws to tax stockpiled funds. I am sure that would be help up in the courts for so long it would never see the light of day.
  - mdorazio 10y ago
    Absurd why? Just because you disagree with the policy doesn't make it stupid. Personally, I think the US tax laws are perfectly reasonable in intent on the issue, they're just poor on execution which results in the situation we currently have. I think we could both agree that a large chunk of the "business" being done abroad by many tech companies is fabricated nonsense based on shuffling IP around, building shell companies, and other tricks that have nothing to do with where money is actually generated in reality. The big losers here are small businesses that don't have the option to play tax avoidance games, not giant companies with multi-billion dollar profits year over year. And I agree with you that we're unlikely to see meaningful forced taxation anytime soon based on the current political climate, but that doesn't mean we shouldn't try.
skybrian 10y ago
On the other hand, money that's just sitting there doesn't harm anything either; it has no effect until it's used. And at the macro scale there's no shortage of U.S. dollars. If creating more money is all that's needed to boost the economy, the Fed can easily do it.
- zanny 10y ago
  Money that stops circulating has a tangible market impact, especially billions of dollars tied up in corporate treasure chests. Stalled money slows the velocity of the economy and effectively shrinks the monetary base. One of the hallmarks of post gold-standard fiat economic planning is to push monetary velocity as high as it can manage through many means because you get more market growth the faster money changes hands and circulates. IE, the capital market could get richer, or it could get faster, and in either case absolute money moved increases. The former is often hard to do, since you either need to print money without causing inflation or cause the money to appreciate against goods into a strong dollar, and both have negative side effects going faster doesn't really have until you are going too fast and realize you have to slow down.
  - skybrian 10y ago
    Not buying it. Removing money from circulation and adding money to circulation should cancel out. Also, that's not really what happens when a corporation has a lot of cash because it's not really cash. The money is still invested, but in safe investments like government bonds. The cash is then still circulating.
tracker1 10y ago
Personally, I'd just assume get rid of corporate taxes, instead taxing at transaction or trade level, and also eliminate corporate person-hood (legally speaking). Top this off with policies that allow for regulatory capture of unutilized or long-term under-utilized corporate assets.

Retric 10y ago

Tax holiday's are a terrible waste. Just tax foreign holdings at say 3% per year as an AMT and suddenly all that money starts flowing again.

guimarin 10y ago
I don't see why I would pay 35% of my holdings to avoid having to pay 3%. Also your plan is impossible because it's not Apple or Facebook or Google the US listed entities that own this money, it's independent country specific subsidiaries. The US Gov't has no territorial claim on their asset reserves. The fact that the big companies report the money as their own is a GAAP sleight of hand that everyone knows already understands both sides of in the marketplace.
- Retric 10y ago
  3% * 10 years = 30%, wait 20 years and well you get the idea. The point is by keeping large foreign holdings you simply gain an ever larger tax burden until you need to bring money back to pay it off. After all foerein holdings are not a problem the problem is the unlimited tax dodge until tax holiday. Also, the ability for companies to have subsidiary's as separate entity's is all down to law and can change at any time. US courts regularly https://en.m.wikipedia.org/wiki/Piercing_the_corporate_veil https://en.m.wikipedia.org/wiki/Piercing_the_corporate_veil
  - thaumasiotes 10y ago
    3% * 10 years is 26%, not 30%. And later payments are better than earlier payments even when they're numerically equal.
    - zht 10y ago
      why is 3% for 10 years 26%?
      - Nullabillity 10y ago
        You're thinking 3% of the original amount, rather than 3% of the remaining amount. If you pay 3% then 97% remains. 0.97^10≃0.74, meaning that you've lost 26%.
    - Retric 10y ago
      That's assuming zero interest. 3% ROI + 3% tax over 20 years... Also, the idea is an AMT tax if you pay 3 million in US taxes and keep 100 million untaxed offshore that's no additional taxes. Next year if you add another 100 million (200m total) your US taxes also increase by another 3 million. So you might as well bring back enough that you would have paid 3 million in extra taxes so 200m - 3/.35 = 191.4m off shore and 8.6m brought back. After a few years your foreign untaxed accounts stop growing as you bring back as much as your making. Same basic math would also apply with 5% or 1% AMT tax rate, the difference is how large the foreign reserves get. PS: Ok, now the downside. It's really hard to parse though untaxed profits of subsidiary's. But, companies like Google are going to stick with legal methods of dodging taxes.
AnthonyMouse 10y ago
> Just tax foreign holdings at say 3% per year as an AMT and suddenly all that money starts flowing again. Now you have one of two problems. If the 3% goes against only cash and not other assets then it's completely ineffective, because they can just hold the money in whatever type of assets aren't included. But if it does include all foreign assets then US companies can no longer do business in foreign countries, because they won't be competitive with local companies that don't have to pay the same recurring tax on the plant and equipment and other business assets needed to operate there.

mdorazio 10y ago

I think you missed the point of my #3. This is like the underpants gnomes in South Park: Step 1: Tax-free repatriation Step 2: ???? Step 3: Economic pizza party What is step 2 here? Is there any actual evidence that repatriated funds would go back to productive things in the US economy? When we had a tax holiday in 2004, it was a complete failure for jobs and development [1], and only helped shareholders and executives. Is that really what we want? For that matter, is there even a guarantee that companies would distribute all the money back to shareholders in a way that would lead to personal income tax? Your argument that the money is not being spent overseas implies lack of confidence in other economies is exactly what I'm saying - there is no productive use of those funds available, or else the holders would already be spending it. I would personally much rather some portion of that money go back to the government for expenditure directly on public projects than have all of it go who knows where when it gets repatriated. I and may other people opposed to tax-free repatriation are perfectly aware of the economics and simply disagree with you on desired outcomes. My opinion is that if you don't want to pay US taxes, don't do business in the US. If you want the benefits of the US labor force, infrastructure, education, legal and military protection, etc. then you should be willing to pay taxes to enjoy those benefits. What other countries do or do not do is irrelevant, as are the desires of necessarily selfish investors. I also disagree that tax-free repatriation is the only long-term solution available - it's just the one you personally like the most. For example, there's nothing stopping Congress from enacting laws to tax stockpiled funds. [1] http://www.wsj.com/articles/SB10001424052970203633104576623771022129888 http://www.wsj.com/articles/SB100014240529702036331045766237...

sigzero 10y ago
>My opinion is that if you don't want to pay US taxes, don't do business in the US. The do business in the US and they pay taxes on the business they do in the US. The US tax laws are absurd on this issue. > there's nothing stopping Congress from enacting laws to tax stockpiled funds. I am sure that would be help up in the courts for so long it would never see the light of day.
- mdorazio 10y ago
  Absurd why? Just because you disagree with the policy doesn't make it stupid. Personally, I think the US tax laws are perfectly reasonable in intent on the issue, they're just poor on execution which results in the situation we currently have. I think we could both agree that a large chunk of the "business" being done abroad by many tech companies is fabricated nonsense based on shuffling IP around, building shell companies, and other tricks that have nothing to do with where money is actually generated in reality. The big losers here are small businesses that don't have the option to play tax avoidance games, not giant companies with multi-billion dollar profits year over year. And I agree with you that we're unlikely to see meaningful forced taxation anytime soon based on the current political climate, but that doesn't mean we shouldn't try.

skybrian 10y ago

On the other hand, money that's just sitting there doesn't harm anything either; it has no effect until it's used. And at the macro scale there's no shortage of U.S. dollars. If creating more money is all that's needed to boost the economy, the Fed can easily do it.

zanny 10y ago
Money that stops circulating has a tangible market impact, especially billions of dollars tied up in corporate treasure chests. Stalled money slows the velocity of the economy and effectively shrinks the monetary base. One of the hallmarks of post gold-standard fiat economic planning is to push monetary velocity as high as it can manage through many means because you get more market growth the faster money changes hands and circulates. IE, the capital market could get richer, or it could get faster, and in either case absolute money moved increases. The former is often hard to do, since you either need to print money without causing inflation or cause the money to appreciate against goods into a strong dollar, and both have negative side effects going faster doesn't really have until you are going too fast and realize you have to slow down.
- skybrian 10y ago
  Not buying it. Removing money from circulation and adding money to circulation should cancel out. Also, that's not really what happens when a corporation has a lot of cash because it's not really cash. The money is still invested, but in safe investments like government bonds. The cash is then still circulating.

tracker1 10y ago

Personally, I'd just assume get rid of corporate taxes, instead taxing at transaction or trade level, and also eliminate corporate person-hood (legally speaking). Top this off with policies that allow for regulatory capture of unutilized or long-term under-utilized corporate assets.