11 ms·

Google Joins Apple in Push for Tax Holiday

73 points by zerostar07 15y ago

adaml_623 15y ago
Here's a better idea. Google and Apple take their taxes back to the US AND they pay tax on those profits. That would definitely help the economy and the budget. It's so sad that corporations can't seem to actually apply ethical judgements in situations like this. Apparently the shareholders are better served by overseas unrepatriated profits than by actually receiving dividends which have had tax paid on them. And having a national government that can fund the infrastructure for their US offices. (Not a tax laywer so reality may differ from opinion)
- SamReidHughes 15y ago
  That would definitely help the economy and the budget. And hurt other countries' economies. You have a strange sense of ethics.
  - ajays 15y ago
    Why should they hurt anyone else? The money's just sitting in a bank somewhere.
- hcal 15y ago
  I'm not a tax lawyer either, but I did stay at a holiday inn last night... Which sadly is my only qualification to comment on this topic. In any case here is how I see it, not that I'm right. Shareholders of international companies are better off if the company doesn't pay the tax penalties from repatriation. Those shareholders will pay taxes on dividends and capital gains, if nothing else. But the question is why would a company bring money back from China (for example) only to pay taxes on it before sending it back to China to pay for the next round of manufacturing? Also, international companies almost always are required to pay taxes on the profits in the country it was earned. There are games you can play to show the profit in your home country, but those are unethical. To understand why think about it from the point of view of each country a company operates. When accounting decisions do come down to questions that could go either way, profit is shown on the books in the country that would incur the least tax expense. Its exactly what most individuals do. For example I love the big city I live near. However, I chose to live outside of city because a don't want to pay for the city government services when the little town I chose live in has similar services and lower tax rates. I pay for the city services I use through the city sales tax, but they are crazy if they think I'll start paying city property taxes on a house that I already pay property taxes on to another town. If I did own both a city home and a home in the smaller town, there is no way I would be OK with the city bring to tax me on both. Similarly Apple pays taxes on its US operations to the US but why should it pay the US taxes on foreign earned profits that it already pays foreign taxes on? I have a hard time faulting a company for not paying anymore than the rules require. Unless every company can agree on how much extra they should pay above the minimum, a company not minimizing their tax burden is at a financial disadvantage and will lose marketshare and eventually be marginalized. The only way I know that you can obtain an agreement to the amount of taxes that should be paid is by changing the tax law. Want more capital brought back into the US economy? Lower the taxes below those of the countries the US is competing with for that capital. Want US companies to pay more taxes? Raise the base tax rate, and close loop holes. While I'm thinking of it... Loop holes are almost never what we think they are. The vast majority are not some shady accounting trick dreamed up in a darkly lit room by a weaselly accountant or tax lawyer. They are discounts on the tax rate voted on by congress, usually intended to produce some good like creating jobs. Really though, if you think about it... It only makes sense to make it easy on companies to move money into the US. If a company wants its cash back in the US, there are only three thing I can think of it would do with it. 1. Put it in the banking system, which grows the economy and increases taxes. 2. Spend it, which grows the economy and increases taxes 3. Give it back to investors, who pay taxes on it and then do one of the other two things.
lubos 15y ago
yep. don't be evil (but only when it suits us) anyway, this is absolutely unacceptable. those corporations knew what they were doing right from the beginning. they kept their profits overseas and were hoping government will decrease corporate tax at some point. it didn't happen, now they are applying political pressure so they don't have to pay the same tax rate as rest of America. THIS IS BULLSHIT and is not fair to rest of the society. damn you Google, Apple and Cisco
rockarage 15y ago
There is going to be a rush to judgement, but I'm not convinced that the government is going to use the tax money wisely. There are too many people in the business of defrauding our government, trillions are wasted on wars, and millions on earmarks. The government knows how to bail out wall street, but they can't turn the economy around. Out of all big international corporations in the US, I would argue that Google and Apple are the most socially responsible (apart from privacy concerns). It won't make sense to bring it back to USA so it can sit in bank accounts and accumulate interests, because those funds are currently accumulating interest as we speak. The obvious uses would be for spending, perhaps for acquisition and growth. The money would eventually be taxed. Keeping the Government in the pinch has forced them to crack down on waste and fraud. It would be much harder for them to bail out wall street this time around.
- othermaciej 15y ago
  The money wouldn't just be taxed eventually, it would also be taxed immediately, though at a reduced 5.25% rate instead of the usual corporate tax rate. And if a corporation repatriating income uses it to pay dividends, or for share buybacks (resulting in capital gains), this will result in taxable income for the shareholders.
  - deleted 15y ago
    [deleted]
  - Retric 15y ago
    Shares owned by people outside the US would not pay any capital gain to the US gov on any dividends.
- bmj 15y ago
  I would argue that Google and Apple are the most socially responsible Can you present that argument? I understand that Google does what it can design and build environmentally responsible data centers, but what else does it contribute to the public good?
- georgefox 15y ago
nl 15y ago
Wouldn't this be a good thing? The money would come back into the US, and if the tax break isn't given then it won't be coming back. I'm as cynical about corporations as anyone, but in this case.. they use 100% legal means to reduce their tax, behaving exactly how anyone would expect them. Some argue that it is an ethical issue, but that neglects the fact that these companies make a large proportion of their profits offshore, and bringing that money gets taxed too. Ethics in this argument are much more subtle than some would have you believe.
- tomelders 15y ago
  They use 100% legal means to keep money off shore. True. But then they ask for a Tax Holiday when that arrangement no longer suits them. One way or another, that money will return to the US, and the tax will be paid accordingly. This will happen over a long period of time. If the US allows this tax holiday to happen, it will be throwing away billions of dollars in the long term with no real short term advantage, whilst sending a very dangerous message to people who use tax avoidance as a long term fiscal strategy. It's corporate Americas job to make try and make the system work for them. It's the governments job to try and make the system work for everyone.
  - nl 15y ago
    One way or another, that money will return to the US, and the tax will be paid accordingly. See, that's where I disagree. All those companies can easily invest that money offshore, either in financial institutions or in building new facilities. Both seem to be worse outcomes for the US than this. To be clear: I don't believe in the "trickle down effect" - I think a progressive system is the only sensible one. BUT I do think any trickle down is better than nothing. sending a very dangerous message to people who use tax avoidance as a long term fiscal strategy It's not tax avoidance, it's tax minimization. There is a big difference. The message I see at the moment is "shift your profits and investment offshore, because it is cheaper". I'm not convinced that is beneficial. It's the governments job to try and make the system work for everyone. I agree with this completely.
    - 15y ago
vsl2 15y ago
Given the past experience with the 2004 tax holiday (little economic investment effect), the current proposal should be rejected. And to allow another tax holiday only sets the expectations that additional ones can be lobbyed for in the future, meaning these companies will again hoard foreign profits offshore in hopes of repeating this request again and again and thereby depriving the government of timely tax revenue. This is a quite blatant attempt by these companies to game the tax system for their own (not public) benefit. As others have stated, these companies obviously held the foreign profits abroad hoping to have/create this type of lower tax opportunity to bring back those profits. However, I don't blame these corporations for trying this - corporations' jobs are to make and keep as much money as possible, mostly in response to shareholders' desires for greatest economic returns. Anyone who owns stock in Apple and Google is a part of the reason for this attempt. If this tactic works, the market value of Apple and Google will increase and isn't that what essentially all shareholders want? Frankly, if these companies voluntarily paid all taxes without trying to find ways to minimize them, most shareholders will be furious at management. Government, through its various corporate/tax laws, sets the limitations on what is permissible and not for corporations, and it hopefully tries to do it in the way that maximizes overall public benefit (balance regulation against enough corporate freedom to incentivize economic growth). The problem I see is that special interest groups have disproportionate power through buying influence. In order to prevent recurring instances of this same situations, the government should firmly show that it will not grant tax holidays now or in the future (then maybe companies will bring foreign profits back right away to the US, thereby paying taxes on time and maybe hopefully spurring economic investment). My Conclusion: Companies (at least public companies) aren't wrong to try to maximize their value in every way within the controlled environment created by governments. The government should act in the way to incentive corporate actions in the best interests of the public (whether it be more tax dollars or economic growth or another objective). Just say no to the tax holiday.
- lurker19 15y ago
  The corporations' managers cross the line from self-interested to sociopatgic when they pass from enjoying current laws to lobbying (bribing) for new laws to suit heir interests.
iamelgringo 15y ago
Suck it up, boys. Pay your taxes like the rest of us. You're sitting on huge war chests of cash. You can afford to contribute a little bit of that to the common good. US companies in general are sitting on $2Trillion in cash. Productivity is sky high, because of all the lay offs across the economy, and profits are generally up across the board in most sectors of the economy. US companies aren't spending because they don't want to spend. They aren't hiring because they are productive enough and are profitable enough without hiring. They are also scared because of all the uncertainty in the financial sector, not necessarily because of the high taxes. The few people that are actually putting money to work in this economy are angel investors and VC's by giving small engineering teams small amounts of cash as well as leeway to experiment at building interesting products.
- Retric 15y ago
  They have little reason to suck it up and pay these taxes. It's easy to book of shore 'profits' and with an occational tax holiday there is huge incentive to do so. Just create a a 'paperclip' in an offshore company and bill the US company 1billion for it and you get to avoid paying taxes what joy. Then wait a few years and bring that money home on a semi regular holiday. PS: Or we could say on Dec 31 there will be a one time 50% tax on any money in offshore accounts and you can clean up this mess real quick with them quickly moving all that money back home.
- sunsu 15y ago
  I don't consider paying taxes to a bloated and inefficient government to be the "common good".
  - jimworm 15y ago
    Isn't a bloated and inefficient government a problem to be solved with elections though? Well, officially anyway.
    - phillmv 15y ago
      I would think that that is the whole point of a democracy. Edit: I am sincerely curious about why I'm being downvoted. If you think your government is broken, work to fix it.
wildmXranat 15y ago
How is this idea even on the table considering current deficit budgets. Regular people don't have the luxury of pulling a fast one on the IRS and pay their dues.
RexRollman 15y ago
I don't understand why corporations don't have to pay taxes on overseas earnings when US citizens living abroad do.
- sjwright 15y ago
  Corporations do have to pay taxes on overseas earnings if they want to bring those earnings back to the US. As far as I'm aware, it's the same for US human citizens. (It's certainly the case for Australian citizens.)
  - yardie 15y ago
    No, US citizens have to pay taxes while abroad whether or not they are returning to the US with it. In fact, some US citizens who have never lived in the US bur have citizenship through inheritance are having a hard time understanding why they are being taxed by a country they have never lived in.
    - jules 15y ago
      Does that mean that some people are paying taxes twice, once in the country they're living in and once in the US?
      - teejae 15y ago
        You kind of pay the maximum of the US and domestic tax rates, after some possible deduction, though not exactly the case given how it gets calculated. But yes, all income worldwide is taxed for US citizens. If you're curious, see: http://www.irs.gov/publications/p54/index.html http://www.irs.gov/publications/p54/index.html
      - yardie 15y ago
        You pay after the first $92.5k. you pay the difference between what you would be taxed in the US minus what you are taxed in your current country. This only becomes a problem if you are living in a country with no or low taxes; ie, HK, Dubai, Saudi Arabia, the Caymans, etc. If you live in Western Europe you are being taxed higher than in the US. Switzerland is a difficult subject because they don't identify you when they report your taxes so the IRS has to trust the Swiss gov't is telling the truth. I believe they have reached an agreement that favors the US and have a lot of Swiss account holders pissed off.
kalleboo 15y ago
> Though the studies found that money brought home in 2004 ended up benefiting a narrow set of shareholders, support is growing in Congress for the tax holiday as companies expand their roster of lobbyists. It's really sad how U.S. government policy is now so openly for sale to the highest bidder.
- mcantelon 15y ago
  If what was going on in the US took place in another country we'd call it corruption and bribery, yet we're supposed to accept the current rule by lobbyists and campaign donations as acceptable. It seem inevitable that the increasing economic inequality and lack of real democracy will lead to significant unrest.
jimworm 15y ago
The title of the article should be "Google, Apple now powerful enough to hold the entire world to ransom". Given the numbers in the article, that's ~$520 billion of tax revenues they're withholding from the state, and ~$1.5 trillion of liquidity they're withdrawing from Ireland or wherever (someone check the numbers?). The thing going for the US is that it's still a good place to spend that money, otherwise they wouldn't be contemplating repatriation in the first place. Arguably, if these companies steadfastly hold on and do not repatriate their funds without a tax holiday, their shareholders should punish them for only making imaginary money... not that it'll hurt them in a real way. If the US were to grant this tax holiday, they should've set a 0% (or 5.25% or whatever) corporate tax rate to begin with. At least it'll be fair to everyone.
jshort 15y ago
This is the exact sort of "tax loophole" that should be put to an end. I almost wish someone pushed back by proposing a raise in taxes for such behavior, and maybe next time these big companies would think twice before they tried to avoid paying taxes that everyone else does.
gwright 15y ago
I don't know enough about this particular tax rule to say something useful but on the general idea of a 'tax holiday' I do have some thoughts. Ad-hoc government policies are wrong. Tax holidays, cash for clunkers, amnesty for illegal immigrants, tax credits for favored businesses, loan-gurantees for that new stadium or 'preferred' manufacturers (e.g. Solyandra), health care 'waivers' for certain companies, are all examples of ad-hoc government. These sorts of policies shred the idea of equality under the law, encourage rampant lobbying in order to gain 'legal' favors, enable politicians and bureaucrats to wield power preferentially, reduce the predictability of the legal and financial environment (taxes, fees, licenses, etc), and skew economic decisions to fit into legislative time windows. Laws should be uniform and consistent rather than moving targets with varying applicability.
- orijing 15y ago
  I totally agree. Not only does it make the tax code much more complicated than it needs to be, but it also discredits the "fairness" of taxes, damaging the very legitimacy of it.
jeffool 15y ago
So, if this is the "carrot" to get corporations to repatriate this wealth, (ignoring business as usual), what would the "stick" look like? Maybe a small, token increase? Or some method of increasing the tax rate dependant upon the length of time between the date the money was earned versus payed out as dividends? Surely stockholders wouldn't let companies sit on cash (that would eventually come back here anyway) if that were the case. You wouldn't even have to be successful, just make a boisterous push to ram THAT through Congress. See how quickly these same companies try to get their assets here under the current tax law.
lambdasquirrel 15y ago
I won't rule here on whether corporations are good/bad or if they deserve the profits. I'd just like to posit my analysis of the situation, which is that: 1) It's been well documented in the financial press now that banks and companies are holding more cash than ever. In fact, Apple is holding more on hand than the gov't. 2) This tax break would be a one time infusion. Corporations can't count on it recurring, if say, they wanted to plan on using it to fund operating expenses (e.g. salaries). 3) Historically, older corporations do not hire sizable numbers of workers. To what extent are these the companies with offshore profits? Ignoring any ethical judgements, to say that it will help boost the economy seems dubious to me. Again, ignoring ethical judgements, I think it is fun to consider other consequences, like what effect it may have on corporations' investments on foreign soil. We might not be able to make jobs here, but maybe we could nudge them away from making jobs there? It only works if you think the world economy is not interconnected though. Anyway, my point is that, yes, there are good moral arguments why this push is reprehensible, and people are making interesting points as such here. Going the other way, I'd like to think about what the hardheaded economic realities are (and they certainly are not about direct job creation). What if it merely adds dollars that these corporations could use for other causes, like lobbying? To what extent do we consider these activities to be good or bad? Donations to charity and contributions to PACs are often one-off. One thing that tickles me is that when donations are big, they go into endowments, which are managed by various financial companies. Good for the charities, but it's not that there are other vested interests. ;-)
eddieplan9 15y ago
I am very curious to see what would happen if, instead of a tax holiday, the US Government announces that it would permanently increase the tax from next year. Would that be an alternative way to encourage big corps to bring profit back now?
rmrm 15y ago
our corporate tax rates as I understand it are second highest in the world. That is offset by the fact that they are riddled with loopholes and deductions. We really need to eliminate special loopholes and deductions and then reduce corporate rates. Having a large spread between US and offshore tax rates obviously gives an incentive for US corps to move factories and such overseas, rather than to export from the US. I don't see any reason to have incentives for that behavior. Reduce all of the paid for deductions and bring rates down. Simplify.
ajays 15y ago
The sad part is: both Democrats and Republicans are beholden to the corporations, and not to the voters. Every law that gets passed has these hidden loopholes and exemptions that benefit a select few corporations. Who puts these loopholes in? This is all done surreptitiously, and I've yet to see any accounting for these loopholes. What we need is a Wiki-like system while drafting legislation, so that every edit can be tracked to the author(s).

73 points by zerostar07 15y ago

Here's a better idea. Google and Apple take their taxes back to the US AND they pay tax on those profits. That would definitely help the economy and the budget. It's so sad that corporations can't seem to actually apply ethical judgements in situations like this. Apparently the shareholders are better served by overseas unrepatriated profits than by actually receiving dividends which have had tax paid on them. And having a national government that can fund the infrastructure for their US offices. (Not a tax laywer so reality may differ from opinion)

SamReidHughes 15y ago
That would definitely help the economy and the budget. And hurt other countries' economies. You have a strange sense of ethics.
- ajays 15y ago
  Why should they hurt anyone else? The money's just sitting in a bank somewhere.
hcal 15y ago
I'm not a tax lawyer either, but I did stay at a holiday inn last night... Which sadly is my only qualification to comment on this topic. In any case here is how I see it, not that I'm right. Shareholders of international companies are better off if the company doesn't pay the tax penalties from repatriation. Those shareholders will pay taxes on dividends and capital gains, if nothing else. But the question is why would a company bring money back from China (for example) only to pay taxes on it before sending it back to China to pay for the next round of manufacturing? Also, international companies almost always are required to pay taxes on the profits in the country it was earned. There are games you can play to show the profit in your home country, but those are unethical. To understand why think about it from the point of view of each country a company operates. When accounting decisions do come down to questions that could go either way, profit is shown on the books in the country that would incur the least tax expense. Its exactly what most individuals do. For example I love the big city I live near. However, I chose to live outside of city because a don't want to pay for the city government services when the little town I chose live in has similar services and lower tax rates. I pay for the city services I use through the city sales tax, but they are crazy if they think I'll start paying city property taxes on a house that I already pay property taxes on to another town. If I did own both a city home and a home in the smaller town, there is no way I would be OK with the city bring to tax me on both. Similarly Apple pays taxes on its US operations to the US but why should it pay the US taxes on foreign earned profits that it already pays foreign taxes on? I have a hard time faulting a company for not paying anymore than the rules require. Unless every company can agree on how much extra they should pay above the minimum, a company not minimizing their tax burden is at a financial disadvantage and will lose marketshare and eventually be marginalized. The only way I know that you can obtain an agreement to the amount of taxes that should be paid is by changing the tax law. Want more capital brought back into the US economy? Lower the taxes below those of the countries the US is competing with for that capital. Want US companies to pay more taxes? Raise the base tax rate, and close loop holes. While I'm thinking of it... Loop holes are almost never what we think they are. The vast majority are not some shady accounting trick dreamed up in a darkly lit room by a weaselly accountant or tax lawyer. They are discounts on the tax rate voted on by congress, usually intended to produce some good like creating jobs. Really though, if you think about it... It only makes sense to make it easy on companies to move money into the US. If a company wants its cash back in the US, there are only three thing I can think of it would do with it. 1. Put it in the banking system, which grows the economy and increases taxes. 2. Spend it, which grows the economy and increases taxes 3. Give it back to investors, who pay taxes on it and then do one of the other two things.

lubos 15y ago

yep. don't be evil (but only when it suits us) anyway, this is absolutely unacceptable. those corporations knew what they were doing right from the beginning. they kept their profits overseas and were hoping government will decrease corporate tax at some point. it didn't happen, now they are applying political pressure so they don't have to pay the same tax rate as rest of America. THIS IS BULLSHIT and is not fair to rest of the society. damn you Google, Apple and Cisco

rockarage 15y ago

There is going to be a rush to judgement, but I'm not convinced that the government is going to use the tax money wisely. There are too many people in the business of defrauding our government, trillions are wasted on wars, and millions on earmarks. The government knows how to bail out wall street, but they can't turn the economy around. Out of all big international corporations in the US, I would argue that Google and Apple are the most socially responsible (apart from privacy concerns). It won't make sense to bring it back to USA so it can sit in bank accounts and accumulate interests, because those funds are currently accumulating interest as we speak. The obvious uses would be for spending, perhaps for acquisition and growth. The money would eventually be taxed. Keeping the Government in the pinch has forced them to crack down on waste and fraud. It would be much harder for them to bail out wall street this time around.

othermaciej 15y ago
The money wouldn't just be taxed eventually, it would also be taxed immediately, though at a reduced 5.25% rate instead of the usual corporate tax rate. And if a corporation repatriating income uses it to pay dividends, or for share buybacks (resulting in capital gains), this will result in taxable income for the shareholders.
- deleted 15y ago
  [deleted]
- Retric 15y ago
  Shares owned by people outside the US would not pay any capital gain to the US gov on any dividends.
bmj 15y ago
I would argue that Google and Apple are the most socially responsible Can you present that argument? I understand that Google does what it can design and build environmentally responsible data centers, but what else does it contribute to the public good?
georgefox 15y ago

nl 15y ago

Wouldn't this be a good thing? The money would come back into the US, and if the tax break isn't given then it won't be coming back. I'm as cynical about corporations as anyone, but in this case.. they use 100% legal means to reduce their tax, behaving exactly how anyone would expect them. Some argue that it is an ethical issue, but that neglects the fact that these companies make a large proportion of their profits offshore, and bringing that money gets taxed too. Ethics in this argument are much more subtle than some would have you believe.

tomelders 15y ago
They use 100% legal means to keep money off shore. True. But then they ask for a Tax Holiday when that arrangement no longer suits them. One way or another, that money will return to the US, and the tax will be paid accordingly. This will happen over a long period of time. If the US allows this tax holiday to happen, it will be throwing away billions of dollars in the long term with no real short term advantage, whilst sending a very dangerous message to people who use tax avoidance as a long term fiscal strategy. It's corporate Americas job to make try and make the system work for them. It's the governments job to try and make the system work for everyone.
- nl 15y ago
  One way or another, that money will return to the US, and the tax will be paid accordingly. See, that's where I disagree. All those companies can easily invest that money offshore, either in financial institutions or in building new facilities. Both seem to be worse outcomes for the US than this. To be clear: I don't believe in the "trickle down effect" - I think a progressive system is the only sensible one. BUT I do think any trickle down is better than nothing. sending a very dangerous message to people who use tax avoidance as a long term fiscal strategy It's not tax avoidance, it's tax minimization. There is a big difference. The message I see at the moment is "shift your profits and investment offshore, because it is cheaper". I'm not convinced that is beneficial. It's the governments job to try and make the system work for everyone. I agree with this completely.
  - 15y ago

vsl2 15y ago

Given the past experience with the 2004 tax holiday (little economic investment effect), the current proposal should be rejected. And to allow another tax holiday only sets the expectations that additional ones can be lobbyed for in the future, meaning these companies will again hoard foreign profits offshore in hopes of repeating this request again and again and thereby depriving the government of timely tax revenue. This is a quite blatant attempt by these companies to game the tax system for their own (not public) benefit. As others have stated, these companies obviously held the foreign profits abroad hoping to have/create this type of lower tax opportunity to bring back those profits. However, I don't blame these corporations for trying this - corporations' jobs are to make and keep as much money as possible, mostly in response to shareholders' desires for greatest economic returns. Anyone who owns stock in Apple and Google is a part of the reason for this attempt. If this tactic works, the market value of Apple and Google will increase and isn't that what essentially all shareholders want? Frankly, if these companies voluntarily paid all taxes without trying to find ways to minimize them, most shareholders will be furious at management. Government, through its various corporate/tax laws, sets the limitations on what is permissible and not for corporations, and it hopefully tries to do it in the way that maximizes overall public benefit (balance regulation against enough corporate freedom to incentivize economic growth). The problem I see is that special interest groups have disproportionate power through buying influence. In order to prevent recurring instances of this same situations, the government should firmly show that it will not grant tax holidays now or in the future (then maybe companies will bring foreign profits back right away to the US, thereby paying taxes on time and maybe hopefully spurring economic investment). My Conclusion: Companies (at least public companies) aren't wrong to try to maximize their value in every way within the controlled environment created by governments. The government should act in the way to incentive corporate actions in the best interests of the public (whether it be more tax dollars or economic growth or another objective). Just say no to the tax holiday.

lurker19 15y ago
The corporations' managers cross the line from self-interested to sociopatgic when they pass from enjoying current laws to lobbying (bribing) for new laws to suit heir interests.

iamelgringo 15y ago

Suck it up, boys. Pay your taxes like the rest of us. You're sitting on huge war chests of cash. You can afford to contribute a little bit of that to the common good. US companies in general are sitting on $2Trillion in cash. Productivity is sky high, because of all the lay offs across the economy, and profits are generally up across the board in most sectors of the economy. US companies aren't spending because they don't want to spend. They aren't hiring because they are productive enough and are profitable enough without hiring. They are also scared because of all the uncertainty in the financial sector, not necessarily because of the high taxes. The few people that are actually putting money to work in this economy are angel investors and VC's by giving small engineering teams small amounts of cash as well as leeway to experiment at building interesting products.

Retric 15y ago
They have little reason to suck it up and pay these taxes. It's easy to book of shore 'profits' and with an occational tax holiday there is huge incentive to do so. Just create a a 'paperclip' in an offshore company and bill the US company 1billion for it and you get to avoid paying taxes what joy. Then wait a few years and bring that money home on a semi regular holiday. PS: Or we could say on Dec 31 there will be a one time 50% tax on any money in offshore accounts and you can clean up this mess real quick with them quickly moving all that money back home.
sunsu 15y ago
I don't consider paying taxes to a bloated and inefficient government to be the "common good".
- jimworm 15y ago
  Isn't a bloated and inefficient government a problem to be solved with elections though? Well, officially anyway.
  - phillmv 15y ago
    I would think that that is the whole point of a democracy. Edit: I am sincerely curious about why I'm being downvoted. If you think your government is broken, work to fix it.

wildmXranat 15y ago

How is this idea even on the table considering current deficit budgets. Regular people don't have the luxury of pulling a fast one on the IRS and pay their dues.

RexRollman 15y ago

I don't understand why corporations don't have to pay taxes on overseas earnings when US citizens living abroad do.

sjwright 15y ago
Corporations do have to pay taxes on overseas earnings if they want to bring those earnings back to the US. As far as I'm aware, it's the same for US human citizens. (It's certainly the case for Australian citizens.)
- yardie 15y ago
  No, US citizens have to pay taxes while abroad whether or not they are returning to the US with it. In fact, some US citizens who have never lived in the US bur have citizenship through inheritance are having a hard time understanding why they are being taxed by a country they have never lived in.
  - jules 15y ago
    Does that mean that some people are paying taxes twice, once in the country they're living in and once in the US?
    - teejae 15y ago
      You kind of pay the maximum of the US and domestic tax rates, after some possible deduction, though not exactly the case given how it gets calculated. But yes, all income worldwide is taxed for US citizens. If you're curious, see: http://www.irs.gov/publications/p54/index.html http://www.irs.gov/publications/p54/index.html
    - yardie 15y ago
      You pay after the first $92.5k. you pay the difference between what you would be taxed in the US minus what you are taxed in your current country. This only becomes a problem if you are living in a country with no or low taxes; ie, HK, Dubai, Saudi Arabia, the Caymans, etc. If you live in Western Europe you are being taxed higher than in the US. Switzerland is a difficult subject because they don't identify you when they report your taxes so the IRS has to trust the Swiss gov't is telling the truth. I believe they have reached an agreement that favors the US and have a lot of Swiss account holders pissed off.

kalleboo 15y ago

> Though the studies found that money brought home in 2004 ended up benefiting a narrow set of shareholders, support is growing in Congress for the tax holiday as companies expand their roster of lobbyists. It's really sad how U.S. government policy is now so openly for sale to the highest bidder.

mcantelon 15y ago
If what was going on in the US took place in another country we'd call it corruption and bribery, yet we're supposed to accept the current rule by lobbyists and campaign donations as acceptable. It seem inevitable that the increasing economic inequality and lack of real democracy will lead to significant unrest.

jimworm 15y ago

The title of the article should be "Google, Apple now powerful enough to hold the entire world to ransom". Given the numbers in the article, that's ~$520 billion of tax revenues they're withholding from the state, and ~$1.5 trillion of liquidity they're withdrawing from Ireland or wherever (someone check the numbers?). The thing going for the US is that it's still a good place to spend that money, otherwise they wouldn't be contemplating repatriation in the first place. Arguably, if these companies steadfastly hold on and do not repatriate their funds without a tax holiday, their shareholders should punish them for only making imaginary money... not that it'll hurt them in a real way. If the US were to grant this tax holiday, they should've set a 0% (or 5.25% or whatever) corporate tax rate to begin with. At least it'll be fair to everyone.

jshort 15y ago

This is the exact sort of "tax loophole" that should be put to an end. I almost wish someone pushed back by proposing a raise in taxes for such behavior, and maybe next time these big companies would think twice before they tried to avoid paying taxes that everyone else does.

gwright 15y ago

I don't know enough about this particular tax rule to say something useful but on the general idea of a 'tax holiday' I do have some thoughts. Ad-hoc government policies are wrong. Tax holidays, cash for clunkers, amnesty for illegal immigrants, tax credits for favored businesses, loan-gurantees for that new stadium or 'preferred' manufacturers (e.g. Solyandra), health care 'waivers' for certain companies, are all examples of ad-hoc government. These sorts of policies shred the idea of equality under the law, encourage rampant lobbying in order to gain 'legal' favors, enable politicians and bureaucrats to wield power preferentially, reduce the predictability of the legal and financial environment (taxes, fees, licenses, etc), and skew economic decisions to fit into legislative time windows. Laws should be uniform and consistent rather than moving targets with varying applicability.

orijing 15y ago
I totally agree. Not only does it make the tax code much more complicated than it needs to be, but it also discredits the "fairness" of taxes, damaging the very legitimacy of it.

jeffool 15y ago

So, if this is the "carrot" to get corporations to repatriate this wealth, (ignoring business as usual), what would the "stick" look like? Maybe a small, token increase? Or some method of increasing the tax rate dependant upon the length of time between the date the money was earned versus payed out as dividends? Surely stockholders wouldn't let companies sit on cash (that would eventually come back here anyway) if that were the case. You wouldn't even have to be successful, just make a boisterous push to ram THAT through Congress. See how quickly these same companies try to get their assets here under the current tax law.

lambdasquirrel 15y ago

I won't rule here on whether corporations are good/bad or if they deserve the profits. I'd just like to posit my analysis of the situation, which is that: 1) It's been well documented in the financial press now that banks and companies are holding more cash than ever. In fact, Apple is holding more on hand than the gov't. 2) This tax break would be a one time infusion. Corporations can't count on it recurring, if say, they wanted to plan on using it to fund operating expenses (e.g. salaries). 3) Historically, older corporations do not hire sizable numbers of workers. To what extent are these the companies with offshore profits? Ignoring any ethical judgements, to say that it will help boost the economy seems dubious to me. Again, ignoring ethical judgements, I think it is fun to consider other consequences, like what effect it may have on corporations' investments on foreign soil. We might not be able to make jobs here, but maybe we could nudge them away from making jobs there? It only works if you think the world economy is not interconnected though. Anyway, my point is that, yes, there are good moral arguments why this push is reprehensible, and people are making interesting points as such here. Going the other way, I'd like to think about what the hardheaded economic realities are (and they certainly are not about direct job creation). What if it merely adds dollars that these corporations could use for other causes, like lobbying? To what extent do we consider these activities to be good or bad? Donations to charity and contributions to PACs are often one-off. One thing that tickles me is that when donations are big, they go into endowments, which are managed by various financial companies. Good for the charities, but it's not that there are other vested interests. ;-)

eddieplan9 15y ago

I am very curious to see what would happen if, instead of a tax holiday, the US Government announces that it would permanently increase the tax from next year. Would that be an alternative way to encourage big corps to bring profit back now?

rmrm 15y ago

our corporate tax rates as I understand it are second highest in the world. That is offset by the fact that they are riddled with loopholes and deductions. We really need to eliminate special loopholes and deductions and then reduce corporate rates. Having a large spread between US and offshore tax rates obviously gives an incentive for US corps to move factories and such overseas, rather than to export from the US. I don't see any reason to have incentives for that behavior. Reduce all of the paid for deductions and bring rates down. Simplify.

ajays 15y ago

The sad part is: both Democrats and Republicans are beholden to the corporations, and not to the voters. Every law that gets passed has these hidden loopholes and exemptions that benefit a select few corporations. Who puts these loopholes in? This is all done surreptitiously, and I've yet to see any accounting for these loopholes. What we need is a Wiki-like system while drafting legislation, so that every edit can be tracked to the author(s).