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The top five tech companies Apple, Microsoft, Alphabet, Cisco and Oracle had a total of $504bn of cash by the end of 2015. They have more money than they know w

by pg314 10y ago

The top five tech companies Apple, Microsoft, Alphabet, Cisco and Oracle had a total of $504bn of cash by the end of 2015. They have more money than they know what to do with. Lowering their tax rates will create exactly zero jobs and have no effect on wages.

tonyedgecombe 10y ago
They would probably return that money to shareholders which they don't feel they can do at the moment because it is mostly held outside the US.
- jbuzbee 10y ago
  And returning that money to shareholders (dividends) would incur income tax to the recipient, thus the tax-man gets his due. A much better outcome than just holding cash overseas
  - pg314 10y ago
    If they return money to shareholders via buybacks, there is no tax. Only when the shareholder sells will potential capital gains be taxed.
    - ryanworl 10y ago
      Someone has to sell shares for Apple to buy them. Those sellers pay tax.
      - pg314 10y ago
        If they realise capital gains and they live in the US. E.g. Belgian stockholders of Apple don't pay any taxes (not in Belgium, not in the US) on capital gains.
        jayd16 10y ago
        So now we'll just have private offshore holdings instead of business holdings?
        spoonie 10y ago
        They probably would pay withholding taxes if their assets are US-domiciled. I.e. of they bought US-listed shares from a US exchange.
        pg314 10y ago
        No. Only dividends are subject to withholding taxes (and are taxed twice, once in the US at 15%, the remainder taxed at 27%). It's a crazy system. Before you think of moving to Belgium: US citizens can't escape the IRS, no matter where they live, and so do pay capital gains tax.
- melling 10y ago
  There's always more R&D. Google could always build a dozen more moonshots. Apple could spend more too. AI, batteries, chips, VR/AR, etc. The future is waiting for someone to invent it.
  - pg314 10y ago
    They are not constrained by money to do more R&D (or they would already be doing it).
    - melling 10y ago
      No one said they were constrained by money for current products. You can always take on more projects and spend more money. Apple, for example, is always extremely focused. Their products fit on one table. Google's moonshots could get very expensive, especially if they venture farther into healthcare. $20 billion R&D budgets can't be too hard to achieve. http://fortune.com/2014/11/17/top-10-research-development/ http://fortune.com/2014/11/17/top-10-research-development/
- dageshi 10y ago
  This would have the unintended/intended consequence of increasing the value of the dollar vs currencies around the world. I think to an extent US administrations see the corporate tax rate and specifically the ability to apply lower rates for repatriated foreign profits as a policy tool for manipulating the strength of the dollar should they need too.
- revelation 10y ago
  Your argument on why Google et al. do not reinvest that money is because it is money they already didn't reinvest where they made it?
maxwell 10y ago
I'm not contesting your main point, but sure why you're including Cisco and Oracle in the "top five tech companies". Facebook, Amazon, and Intel have bigger market caps. Edit: Looks like you're referring to 2015 rather than present.
antr 10y ago
Given that the companies you mention only employ a tiny fraction of the work force, and that in developed countries small businesses employ over half of the workforce, I can only see the abolishment of any corporate income taxes as an excellent trigger for job creation.
- pg314 10y ago
  Sure, some businesses will employ more people if their income isn't taxed. But many others (especially in the tech sector, like you pointed out) won't. Apple alone accounted for 4.4% of all US corporate income ($72.67 billion vs $1.637 trillion according to Wolfram Alpha). I think more jobs could be created by using those taxes to fund e.g. infrastructure projects.
beat 10y ago
More to the point, this should set supply-side economics on a bonfire. The idea of cutting taxes to stimulate job creation is ludicrous when corporations are already swimming in cash. The problem isn't insufficient capital - it's risk aversion and a lack of good places to put the cash already in the system. Supply-side made a lot of sense in the Reagan era, when we had near-runaway inflation and a massive cash crunch, so there was no capital to invest. Now we need things to invest the excess capital in. We need demand. That comes from wages, and no individual company is motivated to raise wages. Tragedy of the commons, in a sense.
- coredog64 10y ago
  That money is parked overseas. Apple can't use the money for designers in California to create the next version of the iPad. Maybe that's good news for Irish designers. If we're lucky, the next iPad ought to have little stickers all over it proudly proclaiming "Designed by Apple in Ireland, Assembled in China".
  - pg314 10y ago
    They could borrow in the US (and they do to finance share buybacks and dividends), while they wait for the next tax holiday [1] to repatriate that overseas money at a low tax rate. The next tax holiday will probably next year. [1] https://en.wikipedia.org/wiki/Repatriation_tax_holiday https://en.wikipedia.org/wiki/Repatriation_tax_holiday

by pg314 10y ago

tonyedgecombe 10y ago

They would probably return that money to shareholders which they don't feel they can do at the moment because it is mostly held outside the US.

jbuzbee 10y ago
And returning that money to shareholders (dividends) would incur income tax to the recipient, thus the tax-man gets his due. A much better outcome than just holding cash overseas
- pg314 10y ago
  If they return money to shareholders via buybacks, there is no tax. Only when the shareholder sells will potential capital gains be taxed.
  - ryanworl 10y ago
    Someone has to sell shares for Apple to buy them. Those sellers pay tax.
    - pg314 10y ago
      If they realise capital gains and they live in the US. E.g. Belgian stockholders of Apple don't pay any taxes (not in Belgium, not in the US) on capital gains.
      - jayd16 10y ago
        So now we'll just have private offshore holdings instead of business holdings?
      - spoonie 10y ago
        They probably would pay withholding taxes if their assets are US-domiciled. I.e. of they bought US-listed shares from a US exchange.
        pg314 10y ago
        No. Only dividends are subject to withholding taxes (and are taxed twice, once in the US at 15%, the remainder taxed at 27%). It's a crazy system. Before you think of moving to Belgium: US citizens can't escape the IRS, no matter where they live, and so do pay capital gains tax.
melling 10y ago
There's always more R&D. Google could always build a dozen more moonshots. Apple could spend more too. AI, batteries, chips, VR/AR, etc. The future is waiting for someone to invent it.
- pg314 10y ago
  They are not constrained by money to do more R&D (or they would already be doing it).
  - melling 10y ago
    No one said they were constrained by money for current products. You can always take on more projects and spend more money. Apple, for example, is always extremely focused. Their products fit on one table. Google's moonshots could get very expensive, especially if they venture farther into healthcare. $20 billion R&D budgets can't be too hard to achieve. http://fortune.com/2014/11/17/top-10-research-development/ http://fortune.com/2014/11/17/top-10-research-development/
dageshi 10y ago
This would have the unintended/intended consequence of increasing the value of the dollar vs currencies around the world. I think to an extent US administrations see the corporate tax rate and specifically the ability to apply lower rates for repatriated foreign profits as a policy tool for manipulating the strength of the dollar should they need too.
revelation 10y ago
Your argument on why Google et al. do not reinvest that money is because it is money they already didn't reinvest where they made it?

maxwell 10y ago

I'm not contesting your main point, but sure why you're including Cisco and Oracle in the "top five tech companies". Facebook, Amazon, and Intel have bigger market caps. Edit: Looks like you're referring to 2015 rather than present.

antr 10y ago

Given that the companies you mention only employ a tiny fraction of the work force, and that in developed countries small businesses employ over half of the workforce, I can only see the abolishment of any corporate income taxes as an excellent trigger for job creation.

pg314 10y ago
Sure, some businesses will employ more people if their income isn't taxed. But many others (especially in the tech sector, like you pointed out) won't. Apple alone accounted for 4.4% of all US corporate income ($72.67 billion vs $1.637 trillion according to Wolfram Alpha). I think more jobs could be created by using those taxes to fund e.g. infrastructure projects.

beat 10y ago

More to the point, this should set supply-side economics on a bonfire. The idea of cutting taxes to stimulate job creation is ludicrous when corporations are already swimming in cash. The problem isn't insufficient capital - it's risk aversion and a lack of good places to put the cash already in the system. Supply-side made a lot of sense in the Reagan era, when we had near-runaway inflation and a massive cash crunch, so there was no capital to invest. Now we need things to invest the excess capital in. We need demand. That comes from wages, and no individual company is motivated to raise wages. Tragedy of the commons, in a sense.

coredog64 10y ago
That money is parked overseas. Apple can't use the money for designers in California to create the next version of the iPad. Maybe that's good news for Irish designers. If we're lucky, the next iPad ought to have little stickers all over it proudly proclaiming "Designed by Apple in Ireland, Assembled in China".
- pg314 10y ago
  They could borrow in the US (and they do to finance share buybacks and dividends), while they wait for the next tax holiday [1] to repatriate that overseas money at a low tax rate. The next tax holiday will probably next year. [1] https://en.wikipedia.org/wiki/Repatriation_tax_holiday https://en.wikipedia.org/wiki/Repatriation_tax_holiday