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I would much prefer a 'cash on hand' tax that would tax yearly the cash on hand that exceeds $1B. That private companies can just sit on all this capital rather

I would much prefer a 'cash on hand' tax that would tax yearly the cash on hand that exceeds $1B. That private companies can just sit on all this capital rather than putting it to work in the economy is a real problem. It harms GDP and it harms working class people. By some estimates its $325B[1]. If we forced companies to invest that cash in new ventures rather than sit on it, it would be a win. [1] https://www.investors.com/etfs-and-funds/sectors/sp500-companies-stockpile-325-billion-cash-financial-mayhem-cornavirus-stock-market-crash/ https://www.investors.com/etfs-and-funds/sectors/sp500-compa...

sebmellen 6y ago
How would you overcome loopholes like the $1 Trillion+ that Apple stores in the Channel islands after funneling it through Ireland and the Netherlands?
- DenverR 6y ago
  Apple has closer to $93b[1] on hand vs. $1t quoted. [1] https://finance.yahoo.com/quote/AAPL/balance-sheet/ https://finance.yahoo.com/quote/AAPL/balance-sheet/
- hanniabu 6y ago
  Tax money leaving the country and have a foreign entity tax.
- abeppu 6y ago
  In my very limited, layperson understanding, all of these fancy multi-country tax schemes involve separate corporate entities in each country which then engage in some set of fictitious transactions (e.g. IP licensing fees) to move money between countries. Also in my pedestrian understanding, around taxes on the value of some hard-to-valuate asset, one mechanism for encouraging owners to be honest in their valuations, rather than under-valuing everything, is that some party (perhaps the government) should have the option to purchase some property at the value claimed by the owner. "You say this trove of old master artwork is only worth $100k? I'll take it!" Is there a reasonable form of this for the colluding branches of multi-nationals? "You've claimed your subsidiary in our country has had $0 net revenue every year for the past 10 years b/c it spends absolutely every available dollar on IP owned by the sister company across the pond? Then since we agree your subsidiary is really clearly struggling, I will buy it for the value of its local real-estate portfolio, plus a small markup."
fuckyah 6y ago
Inflation will take care of it
harikb 6y ago
That probably creates another loophole. Even if they (big cash rich companies) hoard cash, it isn't really sitting as cash. I could claim everything except my bank's liquid cash of reserve of 10% is "invested" somewhere
r2b2 6y ago
That much cash-on-hand is typically stored in a bank. Banks needs cash reserves for lending. The money isn't sitting idle.
WalterBright 6y ago
Nobody sits on cash. Even cash on deposit in a bank isn't in the bank - a multiple of it gets loaned out to businesses and home buyers.
- refurb 6y ago
  Indeed. On most balance sheets it's "cash and cash equivalents". Apple owns treasuries and other "highly liquid assets" that are regarded as cash equivalents. Apple had $12B in true cash at the end of Q3'19.[1] But the "cost of revenue" was $163B. So they had ~7% of expenses available as cash, which makes sense since you don't want to be selling short-term investments to make payroll. You'd need to keep cash on hand to pay expenses. [1]https://finance.yahoo.com/quote/AAPL/financials?p=AAPL https://finance.yahoo.com/quote/AAPL/financials?p=AAPL
  - WalterBright 6y ago
    They still don't have any cash. None. Cash on deposit isn't cash, either. It is not in the bank, it is loaned out. That's how banks make money, and why they pay you to deposit cash in the bank. They're not a charity, they want your cash so they can loan it out 9x to other people. > selling short-term investments to make payroll Payroll is usually met by establishing a "line of credit" with the local bank, because a business's revenue is not on the same schedule as its payroll obligations. Selling short-term investments to make payroll is inefficient (as you imply) but also quite unnecessary.
- ChuckMcM 6y ago
  Sort of and sort of not. Companies do sit on cash. Their cash equivalent accounts are designed so that they can be reliably liquidated in under 30, 60, and 90 days and have no chance of a reduction in principal amount. The kinds of "investments" that allows for are thus quite limited to things such as treasury bonds, certificates of deposit, and some very special case derivative instruments. Those are not the sort of investments that build houses or get loaned out to businesses.
  - WalterBright 6y ago
blaisio 6y ago
Are you sure it's really a bad thing for a company to keep cash on hand? The airlines this year were bailed out because they chose not to keep cash on hand, and then they suddenly lost most of their revenue. So maybe it's actually a good thing for companies to keep some savings available, so inefficient bailouts aren't necessary.
- ChuckMcM 6y ago
  No it isn't a bad thing to set aside cash for future risk. I'm saying that a limit could be established on how much is too much. And then tax just the too much part.
  - microcolonel 6y ago
    > I'm saying that a limit could be established on how much is too much That amount is different for every kind of business. Furthermore, putting cash into the market by force is basically just inflation isn't it?
    - ChuckMcM 6y ago
      > That amount is different for every kind of business. Yes it is, but we could define it algorithmically. Perhaps 5x the median of the last 5 years of operational expense? That would essentally say "you can run with no revenue for 5 years on this pile of cash, that's enough of a rainy day fund." > Furthermore, putting cash into the market by force is basically just inflation isn't it? No, you are perhaps thinking about "printing" money. Which is that money is injected into the economy instead of having it being generated by the economy.
      - microcolonel 6y ago
        > Yes it is, but we could define it algorithmically. Perhaps 5x the median of the last 5 years of operational expense? That would essentially say "you can run with no revenue for 5 years on this pile of cash, that's enough of a rainy day fund." This is completely inadequate, and directly hurts the productivity of business (if for no other reason than forcing companies to account for it). > No, you are perhaps thinking about "printing" money. Which is that money is injected into the economy instead of having it being generated by the economy. Stagnant cash deflates the currency directly, like bitcoin on hard drives in the dump, or sunken pirate gold.
beaner 6y ago
You can deduce that cash on hand harms nobody by doing a thought experiment. If there were a company sitting on $100 trillion in cash - enough to make everyone else's money just a small fraction of the total - how would that hurt anybody? It wouldn't. Idle cash harms no one. You could make the argument that the cash has the potential to be spent in large influential harmful ways, like on elections or something, but that's a very different topic. Taking this money and spending it on things doesn't increase anybody's quality of life. It just moves resources from the natural flowing economy to the people who take the money and spend it first (like newly printed money/inflation). Taking $100 trillion and spending it doesn't create $100 trillion worth of goods if the physical mechanics of the economy are not established to create those goods. It just makes the existing physical capital 100x more expensive in dollar terms, and shifts their distribution to where the politicians want it. You can't increase quality of life by wider availability of goods through the economy by playing money games. Money isn't anything, it's just a matter of accounting. The only thing that actually creates more is the removal of barriers from creating more.
- zerkten 6y ago
  > You can deduce that cash on hand harms nobody by doing a thought experiment. This is incorrect. We know from history we know the before, during, and after states of company finances and the economy as a whole. When companies are not confident in the future they tend to sit on cash reserves versus making their own direct investments. Historically, these direct investments have a benefit for the productive capabilities of the firm. The sin that OP is probably targeting, but I didn't see described, is stock buybacks. If companies are sitting on cash that's one thing, but they can negatively impact their liquidity by buying back stocks with no upside for stakeholders in the long term.
- handoflixue 6y ago
  > Taking this money and spending it on things doesn't increase anybody's quality of life. This would seem a general argument against the entire economy, or at least the concept of taxation. Why is spending this cash any different from spending any other cash? Why can't we spend this money creating a ton of new jobs, that will then create new goods? We have tons of spare stuff just sitting in warehouses right now. There is plenty of slack in the system. Investing cash in to more jobs means pulling some of that stuff out of warehouses and temporarily reducing our slack, yes, but that also motivates people to go do whatever productive thing you're paying them to do - such as creating even more stuff to sit in warehouses.
oliwarner 6y ago
There's always an analogue to hide the cash though. Rare metals are a good example of an investment that's useless to society.
cwkoss 6y ago
I want a progressive tax on businesses, to encourage large companies to break up into competitive units.

sebmellen 6y ago

How would you overcome loopholes like the $1 Trillion+ that Apple stores in the Channel islands after funneling it through Ireland and the Netherlands?

DenverR 6y ago
Apple has closer to $93b[1] on hand vs. $1t quoted. [1] https://finance.yahoo.com/quote/AAPL/balance-sheet/ https://finance.yahoo.com/quote/AAPL/balance-sheet/
hanniabu 6y ago
Tax money leaving the country and have a foreign entity tax.
abeppu 6y ago
In my very limited, layperson understanding, all of these fancy multi-country tax schemes involve separate corporate entities in each country which then engage in some set of fictitious transactions (e.g. IP licensing fees) to move money between countries. Also in my pedestrian understanding, around taxes on the value of some hard-to-valuate asset, one mechanism for encouraging owners to be honest in their valuations, rather than under-valuing everything, is that some party (perhaps the government) should have the option to purchase some property at the value claimed by the owner. "You say this trove of old master artwork is only worth $100k? I'll take it!" Is there a reasonable form of this for the colluding branches of multi-nationals? "You've claimed your subsidiary in our country has had $0 net revenue every year for the past 10 years b/c it spends absolutely every available dollar on IP owned by the sister company across the pond? Then since we agree your subsidiary is really clearly struggling, I will buy it for the value of its local real-estate portfolio, plus a small markup."

fuckyah 6y ago

Inflation will take care of it

harikb 6y ago

That probably creates another loophole. Even if they (big cash rich companies) hoard cash, it isn't really sitting as cash. I could claim everything except my bank's liquid cash of reserve of 10% is "invested" somewhere

r2b2 6y ago

That much cash-on-hand is typically stored in a bank. Banks needs cash reserves for lending. The money isn't sitting idle.

WalterBright 6y ago

Nobody sits on cash. Even cash on deposit in a bank isn't in the bank - a multiple of it gets loaned out to businesses and home buyers.

refurb 6y ago
Indeed. On most balance sheets it's "cash and cash equivalents". Apple owns treasuries and other "highly liquid assets" that are regarded as cash equivalents. Apple had $12B in true cash at the end of Q3'19.[1] But the "cost of revenue" was $163B. So they had ~7% of expenses available as cash, which makes sense since you don't want to be selling short-term investments to make payroll. You'd need to keep cash on hand to pay expenses. [1]https://finance.yahoo.com/quote/AAPL/financials?p=AAPL https://finance.yahoo.com/quote/AAPL/financials?p=AAPL
- WalterBright 6y ago
  They still don't have any cash. None. Cash on deposit isn't cash, either. It is not in the bank, it is loaned out. That's how banks make money, and why they pay you to deposit cash in the bank. They're not a charity, they want your cash so they can loan it out 9x to other people. > selling short-term investments to make payroll Payroll is usually met by establishing a "line of credit" with the local bank, because a business's revenue is not on the same schedule as its payroll obligations. Selling short-term investments to make payroll is inefficient (as you imply) but also quite unnecessary.
ChuckMcM 6y ago
Sort of and sort of not. Companies do sit on cash. Their cash equivalent accounts are designed so that they can be reliably liquidated in under 30, 60, and 90 days and have no chance of a reduction in principal amount. The kinds of "investments" that allows for are thus quite limited to things such as treasury bonds, certificates of deposit, and some very special case derivative instruments. Those are not the sort of investments that build houses or get loaned out to businesses.
- WalterBright 6y ago

blaisio 6y ago

Are you sure it's really a bad thing for a company to keep cash on hand? The airlines this year were bailed out because they chose not to keep cash on hand, and then they suddenly lost most of their revenue. So maybe it's actually a good thing for companies to keep some savings available, so inefficient bailouts aren't necessary.

ChuckMcM 6y ago
No it isn't a bad thing to set aside cash for future risk. I'm saying that a limit could be established on how much is too much. And then tax just the too much part.
- microcolonel 6y ago
  > I'm saying that a limit could be established on how much is too much That amount is different for every kind of business. Furthermore, putting cash into the market by force is basically just inflation isn't it?
  - ChuckMcM 6y ago
    > That amount is different for every kind of business. Yes it is, but we could define it algorithmically. Perhaps 5x the median of the last 5 years of operational expense? That would essentally say "you can run with no revenue for 5 years on this pile of cash, that's enough of a rainy day fund." > Furthermore, putting cash into the market by force is basically just inflation isn't it? No, you are perhaps thinking about "printing" money. Which is that money is injected into the economy instead of having it being generated by the economy.
    - microcolonel 6y ago
      > Yes it is, but we could define it algorithmically. Perhaps 5x the median of the last 5 years of operational expense? That would essentially say "you can run with no revenue for 5 years on this pile of cash, that's enough of a rainy day fund." This is completely inadequate, and directly hurts the productivity of business (if for no other reason than forcing companies to account for it). > No, you are perhaps thinking about "printing" money. Which is that money is injected into the economy instead of having it being generated by the economy. Stagnant cash deflates the currency directly, like bitcoin on hard drives in the dump, or sunken pirate gold.

beaner 6y ago

You can deduce that cash on hand harms nobody by doing a thought experiment. If there were a company sitting on $100 trillion in cash - enough to make everyone else's money just a small fraction of the total - how would that hurt anybody? It wouldn't. Idle cash harms no one. You could make the argument that the cash has the potential to be spent in large influential harmful ways, like on elections or something, but that's a very different topic. Taking this money and spending it on things doesn't increase anybody's quality of life. It just moves resources from the natural flowing economy to the people who take the money and spend it first (like newly printed money/inflation). Taking $100 trillion and spending it doesn't create $100 trillion worth of goods if the physical mechanics of the economy are not established to create those goods. It just makes the existing physical capital 100x more expensive in dollar terms, and shifts their distribution to where the politicians want it. You can't increase quality of life by wider availability of goods through the economy by playing money games. Money isn't anything, it's just a matter of accounting. The only thing that actually creates more is the removal of barriers from creating more.

zerkten 6y ago
> You can deduce that cash on hand harms nobody by doing a thought experiment. This is incorrect. We know from history we know the before, during, and after states of company finances and the economy as a whole. When companies are not confident in the future they tend to sit on cash reserves versus making their own direct investments. Historically, these direct investments have a benefit for the productive capabilities of the firm. The sin that OP is probably targeting, but I didn't see described, is stock buybacks. If companies are sitting on cash that's one thing, but they can negatively impact their liquidity by buying back stocks with no upside for stakeholders in the long term.
handoflixue 6y ago
> Taking this money and spending it on things doesn't increase anybody's quality of life. This would seem a general argument against the entire economy, or at least the concept of taxation. Why is spending this cash any different from spending any other cash? Why can't we spend this money creating a ton of new jobs, that will then create new goods? We have tons of spare stuff just sitting in warehouses right now. There is plenty of slack in the system. Investing cash in to more jobs means pulling some of that stuff out of warehouses and temporarily reducing our slack, yes, but that also motivates people to go do whatever productive thing you're paying them to do - such as creating even more stuff to sit in warehouses.

oliwarner 6y ago

There's always an analogue to hide the cash though. Rare metals are a good example of an investment that's useless to society.

cwkoss 6y ago

I want a progressive tax on businesses, to encourage large companies to break up into competitive units.