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Of course lowering taxes would encourage companies to repatriate large overseas cash hoards, but if that's the only goal, why have a tax at all? As a country t

• ixtli 9y ago
  This is exactly the thing that renders me speechless every time this comes up in casual conversation. People generally agree that apple and other tech companies hoarding money in Ireland to avoid tax is Bad™. Then, in the next breath, they say that removing the tax burden to get them to move that money back into a US bank is somehow Good™. But what does it matter if the government can't take a cut? Why do people who don't profit off of apple care which bank it's in?
  • jaredhansen 9y ago
    Nobody cares "which bank it's in" - but if a company has $1B in out-of-US cash not currently subject to US tax, and bringing it into the US will cost them 30% of it, they may (sensibly, in many cases) just elect to leave it sitting wherever it is. As to "what does it matter if the government can't take a cut?" --- the government does take a cut, and the reason it matters is that the lower rate will, on the margin, encourage cash repatriation. Remember too that firms know they will be taxed in the future at (unknown, but estimable) rates, and today's rate will be compared against firms' estimates of current rates. So in terms of the government's cut I forget the numbers in the current plan but say the corporate tax rate goes from 30% to 20%, and Apple decides that 20% is As Good As It's Likely To Get, and decides therefore to bring $1B of cash into the US that at a 30% rate it would have left elsewhere -- the US gov now gets 200M, rather than the 0 it would have gotten if the tax rate had stayed where it was.
  • danjayh 9y ago
    Also you seem to be under the incorrect assumption that capital will just sit in a warehouse as bricks of $100 bills collecting dust. Nothing could be further from the truth. In reality, one of a few things will happen: 1) Apple will spend it on capital investments (factories, campuses, data centers, etc.) in its business. Doesn't benefit the government, but benefits the country. 2) Apple will spend it on R&D / employees. Doesn't benefit the government directly, but benefits the country. 3) Apple will dump it into an American bank. That bank has a reserve ratio that is relatively low. It will lend several times the amount that Apple deposits to people or corporations who will do 1) or 2) 4) Apple will spend it on buybacks and dividends, which ultimately ends up in the hands of Apple's owners (you and me through our 401(k)'s, and probably a bunch of rich people as well), who will do 1), 2), or 3) So, whether or not the government gets a cut, it benefits everyone who actually lives here.
    • pg314 9y ago
      You seem to be under the incorrect assumption that it is currently sitting in a foreign warehouse as bricks of $100 bills collecting dust. Nothing could be further from the truth. According to page 49 of Apple's yearly report [1] at the end of 2016 its cash and equivalents were invested as follows (amounts in millions): * U.S. Treasury securities 41,697 * U.S. agency securities 7,543 * Non-U.S. government securities 7,609 * Certificates of deposit and time deposits 6,598 * Commercial paper 7,433 * Corporate securities 131,166 * Municipal securities 956 * Mortgage- and asset-backed securities 19,134 The repatriation is just a tax/accounting fiction. Yes, Apple now has more flexibility to do with that cash what it wants (mostly return capital to shareholders through dividends and buybacks), but on aggregate for the economy it doesn't make a huge difference. [1] http://investor.apple.com/secfiling.cfm?filingid=1628280-16-20309 http://investor.apple.com/secfiling.cfm?filingid=1628280-16-...
      • danjayh 9y ago
        I know this post is a few days old, but having that cash invested in treasuries, bonds, CDs, etc. is as close to a warehouse as it can possibly get. I strongly suspect that a good chunk of it will be spent on capital investments once it's repatriated.
• makomk 9y ago
  You yourself point out the reason to have a tax at all: because someone has to pay for the cost of the US government. Also, at least in the versions I heard about this was a very carrot-and-stick tax bill. It didn't just allow companies like Apple to repatriate their foreign cash hoards at a lower tax rate, it taxed that foreign cash at the same one-off rate whether they repatriated it or not. The whole point was to remove all incentives to not repatriate money, to make it futile to try and wait for some hypothetical opportunity to do so at an even more reduced tax rate.
• downandout 9y ago
  We currently get $0 in tax revenue from the cash Apple is hoarding overseas. This tax “holiday” (a term I dislike because it incorrectly implies that no tax is being paid on the repatriation, when it is simply a reduced rate) is resulting in $38 billion that we would not have otherwise received. $38,000,000,000 > $0
  • xienze 9y ago
    Yeah but uh... Trump. So this is bad. /s
  • megaman22 9y ago
    Exactly. X% of something is better than (X+Y)% of nothing.
  • onezerozeroone 9y ago
    If you or I decided we just didn't like the tax rate that applied to us and didn't pay our taxes for decades at a time on income we made overseas, what do you think would happen? Corporations are treated as people only when it's convenient. You and I don't have high-powered lawyers, lobbyists, loopholes, offshore accounts, subsidiaries, etc to hide behind. This is an insult to every U.S. citizen...Apple wouldn't exist if it weren't for the U.S. and its tax-payers providing the environment that allowed Steve Jobs to create his company and become successful. The rate they're being charged on this money is even lower than the new lower rate that they'll be charged on future income. Must be nice. Yay for corporate oligarchy.
    • airstrike 9y ago
      I get your point. Only caveat is corporations also create jobs and pay their workers, but you and I as individuals do not. I know lots of Apple workers (directly or indirectly) are in China, but I wanted to point out why it's inappropriate to compare personal and corporate taxes.
      • Retric 9y ago
        I create jobs all the time. Companies employ people based on Demand not simply whimsy.
• axau 9y ago
  That makes no sense. Then the government would get nothing, plus give up future leverage, so obviously it will not do that. Comparing what happened to having no tax is a straw man. What happened here is that the government finally set a rate that is agreeable to both parties, which is of course in its interest and long overdue.
  • lbrdn 9y ago
    How is it a straw man? Maybe it's the right way to go. I honestly don't know. My point is that encouraging a behavior where the country sets a rate, then many celebrate the reduction because they get a short term gain, risks leading the US farther down a path that neglects its obligations.
    • axau 9y ago
      Because the US is not going “down a path that neglects its obligations”. In fact quite the opposite since it just got a massive tax revenue increase. So comparing it to a situation where the US decided to just stop levying tax doesn’t make sense.
      • gonvaled 9y ago
        It legislated a reduction in tax revenue hoping / pretending that an increase in economic activity will offset the reduction. Fact 1: reduced tax rate and revenue Fact 2: permanent beneffit to corporations, in the form of tax reductions Bet 1: the economy will grow Bet 2: the proffits will trickle down Bet 3: increase in economy will allow to fullfill obligations If the bets do not materialize, nobody cares. That is, nobody except tax payers and recipients of federal promises. Corporations and wealthy individuals will pocket proffits upfront. The rest are left praying for the bets to work out.
        • axau 9y ago
          We’re talking about the repatriation part here, not all the others, which are a different debate.
• dibujante 9y ago
  Some people make the (good? I don't know) argument that corporate taxes are distortionary anyways, and shuffling that tax burden over to income has the same effect with fewer side effects.
  • rlanday 9y ago
    I think people like corporate taxes because people only have a vague idea of where the incidence actually falls. Clearly, at the end of the day, corporate taxes take money out of the pockets of business owners/shareholders, employees, and customers in some proportion, but no one's really sure what it is. Taxes that you're obviously paying are unpopular, whereas taxes it feels like "someone else" is paying are less unpopular.
    • tuna-piano 9y ago
      You're of course right that owners/customers/employees/vendors/etc pay the corporate tax. But when you say "tax the corporations" it sounds an awful lot like "tax the rich people", and people imagine the Monopoly man with a monocle shelling out money from his tuxedo pockets. Of cours, in the real world, you likely work for a corporation, and the retired Teachers in California are collectively one of the biggest owners of companies in the US [1]. [1] - https://en.wikipedia.org/wiki/CalPERS https://en.wikipedia.org/wiki/CalPERS
    • danjayh 9y ago
      My father, who is quite wise and right about many things, is very fond of stating that corporation's don't pay taxes - they just pass them on to other people. He owned a local redi-mix company until he retired, and they routinely adjusted wages and prices in response to local, state, and federal tax changes. It's a fact of life that the money corporations pay comes from somewhere, whether it's on the 'in' side or the 'out' side of the balance sheet.
      • jeremysalwen 9y ago
        One of those "out" sides of the balance sheet is the owners of the corporation. That's generally who people think of when they think of who "pays" corporate tax. Especially for taxes on profits, which go 100% to the owners.