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Apple, Microsoft, and Google hold 23% of all U.S. corporate cash (geekwire.com)
409 points by sethbannon on May 27, 2016 | hide | past | web | favorite | 156 comments

The US tax code heavily punishes companies that hold cash in a variety of ways. The motive is to subsidize banks by requiring companies to rely on short term debt for operations. It's the biggest and most lucrative of subsidies for the banking industry and laundering such subsidies is how many bankers get rich. For instance, Mitt Romney made his money that way.

(The main tax code subsidies here are the business interest loophole and the accumulated earnings tax)

Usually a big company holds almost no liquid assets and hands profits out to bondholders and shareholders or invests actively to grow, even in unrelated businesses. That's to avoid tax penalties.

Apple, Google, Microsoft, and the like are holding masses of cash outside the USA. Gridlock in Washington and a stagnant and irrational corporate tax code make it very hard to bring cash home to invest for American companies. Therefore you find tech companies with few overseas expenses exporting services and accumulating cash they can't bring home.

(The main tax issue here is the non-territorial tax system in the USA. All other developed countries have a territorial system.)

Other countries can see this is a problem that kills jobs and wages at home so they don't do it. Obama has tried to fix it and Trump's main tax proposal is aimed at it, but both parties in Congress block change. Republicans don't want to hand Obama a victory and would rather hand out goodies to donors with loopholes than simplify taxes and Democrats just want to punish profitable multinationals even if it kills jobs.

And Wall Street is very mercurial with credit for tech companies, especially growing ones, so they can't rely on the banking subsidies.

The result is that tech giants are the only companies with a reason to accumulate cash so they overwhelmingly are the only ones that do so.

In summary, this is a government regulatory policy that creates cash rich tech companies. It's a result of bad decisions on Capitol Hill, not on Wall Street or Sand Hill Road. It is not a stock valuation or corporate strategy issue.

I'm trying to figure out where to start with this comment.

1) What is "business interest loophole"? Do you mean carried interest, which really only applies to investment partnerships and not corporations?

2) The purpose of the Accumulated Earnings Tax is right in the IRS description of it - "The purpose of the accumulated earnings tax is to prevent a corporation from accumulating its earnings and profits beyond the reasonable needs of the business for the purpose of avoiding income taxes on its stockholders." It is generally in society's best interest for companies to reinvest their money in the economy and citizens rather than hoarding it, hence the tax. Or do you disagree with that?

3) I have yet to see anyone take the "we should let corporations bring back their money tax-free" argument beyond just saying that it would somehow magically create jobs. Can you provide a rational breakdown of how this is supposed to work? Apple brings back $200B to the US and then... what? Hires people it doesn't need? Builds factories that won't be profitable? If a company thinks it can make more money by investing in on-shore resources, then it will invest. Instead they're hoarding cash because they don't have anything good to spend it on. The only argument I can see is that ROI for on-shore use of funds has to be higher than the repatriation tax rate to justify bringing the money back, but so what? That just means that we're in an economic situation where no one thinks they can get a 35% ROI on hiring more people or spending more on R&D at the scale of multiple billions per year.

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.

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/SB100014240529702036331045766237...

If they repatriate the cash, the company can

a) pay dividends, which are taxed on the recipient

b) buy back shares, generating a capital gain for the seller, which is taxed

c) park it in a bank, which boosts reserves and indirectly stimulates the economy

d) make alternative investments such as corporate venture capital, real estate etc

I personally think there should be no corporate income tax. Instead, taxes should be paid by citizens when the money hits their personal bank account.

Yes, there would be opportunities for evasion by people incorporating themselves. No, I don't know what the ultimate solution to that is.

BUT... right now there is an army of accountants and lawyers who are able to charge companies like Apple exorbitant fees because the potential tax savings is so huge. If you have a $100 million tax liability, using accounting tricks to lower that liability by $20 million justifies paying a lot of lawyers.

If those gains were distributed instead of taxed at the corporate level, suddenly those lawyers will find they have to service a thousand, probably tens of thousands of customers to realize the same payoff they get from one big customer. That changes the economics of tax evasion considerably.

Thank you for laying out the likely outcomes. My issue is two-fold: 1) we're basically saying "I guess 15% (dividend and long term cap gains tax) at most (probably less) is good enough" instead of the 35% they would normally pay, which just generally seems like bad thinking to me when it comes to setting policy, rather than finding a different solution. And 2) I'm not aware of any evidence that b, c, and d are likely to have a positive outcome for the US as a whole rather than for individuals. (b) assumes that capital gains will be realized and taxed within a short-term time frame, (c) assumes that banks are actually in need of reserves, which I don't believe is true [1], and (d) assumes that alternate investments would actually be pursued that aren't being funded right now, which I'm also not sure is true to any significant extent (ex. Google already has Tech Stars and spends mountains of cash on real estate)

[1] https://twitter.com/dallasfed/status/433408941947494400

That "15 percent" dividend tax is on top of venture returns that are taxed at 35%. It's like if people were saying you have it easy because you only pay 5% taxes, without mentioning that you have to pay regular income/FICA taxes, before it hits your bank account, and the 5% attaches the second you start to spend it.

Maybe the whole point is to force corporate profits out of the country, thus giving US companies a motive to purchase assets or companies in other places. The US dollar is different in that it is a reserve currency so there are forces in play here that do not make sense unless you take reserve status into account. I think it is advantageous to keep USD outside the US because it can then circulate in other countries further cementing its position as a reserve currency, its a feedback loop.

> I think it is advantageous to keep USD outside the US because it can then circulate in other countries further cementing its position as a reserve currency, its a feedback loop.

I have never heard of this. Anything I can read or Google about this?

>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.

The problem is not that they aren't paying taxes on their foreign income. They are evading taxes even on the income earned in US.

They setup a subsidiary in a offshore tax heaven, transfer their patents and intellectual property to offshore tax heaven, and then route the profits from US company to their offshore subsidiary with transfer pricing tricks.

Some of these companies claim that their headquarters are in Switzerland, Ireland or Cayman Islands. But in reality they are nothing more than a PO box and bank account.

Countries with territorial systems have to monitor transfer pricing scams. The US actually ends up with much less revenue because it doesn't care as much about internal pricing abuse.

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.

How is its execution considered "poor"? Do you have any idea how difficult it is for an American to open a non-American bank account outside of America due to FATCA?

If your an American in the UK Banks wont touch you with a barge pole and you are effectively excluded from things like ISA's

> and only helped shareholders and executives

Isn't a large fraction of the US (40% or more?) shareholders? I am one, and I'm certainly not a member of the business elite.

Indeed a large fraction which doubtless correlates with the wealthiest. Dropping taxes means greater wealth disparity is built in - the poor get poorer because they can't afford to invest.

Why should you allow tax free repatriation of money that's largely accrued abroad as a result of choosing not to invest locally and avoiding taxes on profits with IP trickery. The only reason I can see that the demos has to allow such repatriation is if trickle-down theory weren't false.

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.

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.

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.

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.

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.

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.

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

Only if this money yields 0% in the meantime. Even with a 3% tax, it's probably still better to reinvest through your offshore entity than to repatriate.

Most western interest rates are very close to zero or even below. I guess that in Zimbabwe you would get reasonable nominal interest rates but there are some other issues that make it uninteresting for most investors.

Yes, peg that kind of AMT to inflation.

3% * 10 years is 26%, not 30%. And later payments are better than earlier payments even when they're numerically equal.

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.

3% tax every year for 20 years is 46%. It doesn't matter what interest rate you get on your holdings; that tax reduces your worth 20 years down the line by 46%.

> 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.

I'm not following you. Suppose every year my goal is to minimize the taxes I pay that year. What benefit do I see from repatriating those $8.6M?

Scenario A: I have $200M offshore and pay a 3% offshore-holdings penalty of $6M. Taxes are $6M.

Scenario B: I have $191.4M offshore on which I pay a 3% offshore-holdings penalty of $5,742,000. I repatriate $8.6M on which I pay a 35% repatriation penalty of $3,010,000. My total taxes in this scenario are $8,752,000, which I notice is more than $6,000,000. What did I gain?

It's an AMT, so for Scenario B: the AMT is 5,742,000 which is a minimum and not added to anything. AKA You pay that or other taxes if your other tax bill is higher.

You repatriate 8.6M which leads to tax of: 3,010,000. 3,010,000 < 5,742,000 you pay 5,742,000. Which is less than 6 million. (This assumes you have zero tax bill for US operations.)

Also, paying this does not decrease your future tax bill next year in any way. So if your interest rate is zero you pull money back this year. The idea is to penalize behaviors designed to reduce taxes.

why is 3% for 10 years 26%?

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%.

> 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.

3) What is the US government getting now from all that cash that is not being repatriated? Is it a game of chicken? Apple is using that money, investing it in Chinese companies:


It could have been doing that in the USA. It could have acquired Tesla. It still can.

Forget creating jobs... Apple is now funding businesses in other countries that will be competing with US companies.

Why does it help create jobs for Apple to acquire Tesla? I think that's a poor choice for an example.

That cash is what Apple has left AFTER those investments abroad.

Um u understand that in china they get same job done for 10% price of what it would cost in usa, thus makes profit, thus is alive and not closed down.

1. The business interest loophole is the loophole allowing the expensing of amounts referred to as "Business Interest Expense" in IRS Publication 535.

See also Form 1120, line 18.

2. That is a silly motive. It does not hold up to elementary economic scrutiny. That tax is a minor driver compared to the business interest loophole, but is one part of why non-tech companies don't accumulate cash. The fact to be explained in op is why big tech companies hold cash and the various other big business industries in the USA do not.

3. Cash in the hands of principally American companies can be spent on business operations in America. Either a big company can invest it itself or it can distribute cash to stockholders who then invest it in other businesses.

Cash locked up overseas will eventually have to be penalized with double taxation so that it can be distributed to stockholders or it will be invested overseas. When it's spent overseas, it will be invested in workers and factories and supplies overseas.

US companies and workers could, in theory, bid for those overseas contracts. But overseas suppliers and workers will have big advantages. If the money came home, those jobs and supplier contracts would give advantages to American businesses and workers.

The Senate claims that, according to a survey of 27 multinationals, half the money held overseas is already invested in US treasury notes, funds, bonds, or stocks.


Thanks for #1. Can you explain how the loophole actually works in practice for a large company? From my reading, it seems like it would apply mostly to issued corporate bonds, with the interest paid to bondholders deducted from tax liability. If that's right, then I'm not too clear on how it's an unfavorable loophole.

In what way is #2 a silly motive exactly? Economics does not operate in a social or governmental vacuum. Corporations exist because societies (and the individuals that compose them) support them, and thus have a rational reason to expect them to use profits to actively participate in those societies. The reason why tech companies hold more cash overseas than other big US industries is fairly well-studied. From [1] "Keeping money overseas is particularly easy for technology and pharmaceutical companies whose profits stem from intellectual property that can swiftly be moved." It's more difficult for non-tech big businesses to use the available legal tricks to claim money was generated overseas.

The key word in your #3 is "can" since it's not at all clear what they will do in actuality, nor is it clear that it will actually be good for the US [2]. You also seem to be assuming that there are jobs and supplier contracts domestically that companies aren't investing in as a result of overseas cash, but I have yet to see any evidence of that. In fact it would seem that the whole existence of these massive overseas funds implies the opposite since operating revenue is obviously far in excess of costs (otherwise they wouldn't have huge profits that need to be dumped overseas) and money has been extremely cheap for years even if companies did need additional funding.

[1] http://www.bloomberg.com/news/articles/2015-03-04/u-s-compan... [2] http://www.wsj.com/articles/SB100014240529702036331045766237...

Say I'm a rich investor and we meet over brandy and cigars to discuss your business plan.

I invest $100. You spend the $100 to get $200, making $100 in profits. You pay corporate income taxes of $43 (average state plus federal rate) leaving $57 and then pay me that. I pay $17 ($57*30%—federal dividend tax plus medicare tax plus state average) and keep $40.

(It's the same $40 if you liquidate the company and pay me out the money as a capital gain. Also it's the same if you use it to repurchase my equity to cash me out.)

Instead suppose I loan you $100 at 100% interest. You spend the money and make $100 profit, exactly enough to pay my interest and you pay me the money. The profit is entirely tax free for you because of the business interest loophole that exempts 'interest' from taxation. I pay regular income tax of 46% (top federal, Medicare, and typical state rates combined) and keep $54.

Note that the two situations are exactly the same for you. You took my money and earned $100 (after presumably paying yourself) and ended with $100 profit. Then you gave me back the profit. But if I'm a shareholder with skin in the game, I get only $40 back. If I'm a 'passive' investor that just made a loan I get $54. Either way I put the same money at risk and get the same result, but one way the IRS lets me keep 35% more profit because we called it a loan.

But usually we don't know how much profit there's going to be. And sharing profits with multiple rounds of investment is hard with debt. And debt is lousy for profit sharing and stock options.

But if you run a bank, you can underwrite debt contracts that skirt those limits with conditional clauses and preferred liquidations and complicated conditional partial default clauses. And you can arrange convertible debt if necessary. And handle negotiations when conditions change.

Simple loan contracts are much less flexible than equity and usually not sufficient to keep all parties happy and secure. Note that if you try to handle complicated loan contracts yourself without a bank underwriting them, the IRS can reject your definition of a loan and charge you the stock dividend rate and issue heavy penalties. The IRS knows that loans are powerful tax avoision tools and the definition of what is a loan and what is equity is vague and undefined. They will look into your arrangement if it seems too good. If you pay fees to a reputable bank to underwrite, your investment is presumptively a loan and the IRS will never bother you. But if you're not paying protection cash to the banking industry, woe is you.

Companies would prefer to issue stock and let the market handle all those issues more simply, but equity financing means giving 35% of profits straight to the government.

If you issue bonds instead, you can keep the 35% and get you investment capital cheap. All you have to do is pay a few percent of all corporate profits to bankers and issue bonds.

It's a huge subsidy to banks and big old stable corporations with credit ratings. Probably it's worth around half of all US banking profits, tens of billions of dollars annually. (If you take stocks as the baseline, it's worth hundreds of billions.)

And you take advantage of it by keeping very little cash profit and running operations on as much debt as you can use. That allows you to pay out profits as interest. That's why most non-tech companies have little cash.

And it's why companies prefer to pay on corporate bonds rather than issue dividends.

It is generally in society's best interest for companies to reinvest their money in the economy and citizens rather than hoarding it, hence the tax.

This is generally not true. Consider two uses for a human - he can build a piece of factory or build a home. Suppose the factory has an NPV of $99, while the consumption value of the home has an NPV of $100.

The best thing to do with this human's labor is building the home.

If we have the AET, the corporation may be taxed $5 on this $100 if they don't build the factory. Therefore the corporation pays $100 for the human to build the factory, creating an NPV of $99 for society.

If we don't have the AET, the corporation hoards the cash (or distributes it to shareholders) and the human then builds a home instead of building the factory.

The only argument I can see is that ROI for on-shore use of funds has to be higher than the repatriation tax rate to justify bringing the money back, but so what? That just means that we're in an economic situation where no one thinks they can get a 35% ROI

You just answered your own question. If you have an X% ROI overseas, the company needs to gain an X+35% ROI in the US for the investment to be equally profitable.

If we eliminated the tax on global earnings, then companies will invest the money in projects with an ROI larger than X% and smaller than X+35% that they would not otherwise have done.

Do you believe all possible domestic projects have an ROI either smaller than X% or larger than X+35%? That's the only way eliminating this tax wouldn't spur investment.

> rather than hoarding it

Nobody hoards cash. It's all invested, one way or another. Even 'cash on deposit' is invested in that the bank loans it out. The idea that cash is withheld from the economy is incorrect.

What's happening here is the cash is getting invested in foreign economies rather than local ones, not that it is being withheld or "hoarded".

> Even 'cash on deposit' is invested in that the bank loans it out.

If you combine this with the fact that banks work on fractional reserves, then there'd end up being infinite money... but there isn't because it's not true. Of course banks _do_ give out loans, but they're not at 100%. And there are capital limits and the like...

Look at Japan. Why do you think the central bank is at negative interest rates is because banks aren't loaning out money. Or they are but companies aren't spending the money, which basically comes out to the same thing, minus a credit subsidy.

I think if you dig deeper into this problem, you'll find both that there's a decent inflow into banks that don't have corresponding outflow.

>If you combine this with the fact that banks work on fractional reserves, then there'd end up being infinite money... but there isn't because it's not true.

In practical terms the only limit to the amount of new money is the amount qualified borrowers are willing to borrow. Banks that don't have enough reserves typically borrow from other banks or from the central bank. The central bank (in the US, at least) isn't bound by reserve limits at all and can create money by changing a number in a computer.

The lack of lending by banks isn't a problem in and of itself. It's a symptom of the underlying problem, which is a lack of economic activity that would require borrowing.

I do know about fractional reserve banking, and know that the government requires a minimum reserve percentage. The banks holding a percentage required by law is not an instance of corporations hoarding cash.

The reason banks offer free checking is so they can get your money on deposit and then make money loaning it out back into the economy. They aren't offering free checking because they are being charitable.

These companies are not banks so I am not sure why we are talking about cash on deposit. Cash that exists on a corporate balance sheet for a non bank company really only exists to reduce risk of default on obligations or prepare for a cash investment of some kind. Not an accountant but can't think of any other use of cash.

> why we are talking about cash on deposit

Because the companies do not have cash hoards. They put cash in a bank. The bank loans the money out to people who spend it.

The idea that corporations are Smaugs with mountains stuffed with gold coins needing to be liberated by hobbitses and merry bands of dwarves is a fine fairy tail, but is not how modern economies work.

(The amusing thing about Smaug's hoard is it was so ridiculously large that if it was spent by the dwarves, the value of gold would completely collapse to the point where it'd be used to make plumbing.)

I really like the analogy but Smaugs' gold might track inflation if lucky whereas cash carries inflation risk. A nice problem to have in the realm of "first world problems" for sure but still a problem. Also, if the companies had good enough perceived growth opportunities they would be investing instead of carrying hoardes of cash.

A more or less real world experiment with Smaug's gold happened when the Spanish exploited S. America for gold and silver, shipping it back to Spain.


The inference I draw is that prosperity does not stem from adding large quantities of money (gold) to the economy; what happens instead is disruption.

(3) repatriating ...

Very few other countries will tax foreign earnings the way the US does. If you were a company would you want to lose 35% of your money to spend it in the US, or just wait to find a project overseas? That tariff is a much higher bar for local investment. And trust me, they have projects they want to spend money on. Most of the money would probably get paid out in dividends if it was only a one-time thing (ala 2004), since you don't want to start projects you cannot fund in the future, but even that pumps more money into other projects in the US indirectly.

Companies have these massive cash reserves because they are massively profitable each year and need somewhere to store the excess. So I fundamentally disagree with your argument that they have projects they want to fund and don't because they can't easily access the overseas cash. We're talking about tens of billions of dollars here for many companies, not $100M to sink into a new department or research project, which they can either easily fund out of operating revenue or get a loan for at less than 5% interest.

As I stated in another comment, the only winners of the 2004 repatriation holiday were shareholders and executives, not the American public. That's a big reason why people don't want a repeat.

>Companies have these massive cash reserves because they are massively profitable each year and need somewhere to store the excess.

To be clear here, American companies aren't moving cash from the US out to overseas to hide them from the IRS - this is cash that was generated overseas. For every iPhone sold in the US, Apple is paying an appropriate tax.

A similar way to look at this is, lets say you moved to Russia, started a new life, with a new job, and every time you wanted to send money to your mom, the US took a 35% cut.

(I'm aware that American expats still have to pay taxes as well).

It's more like you moved to London, got a new lucrative job, and paid zero taxes by squirreling all your income away into a tax haven. And then you want to send that money to your US bank account without paying taxes to anyone. As a result your new London friends have to pay more tax to pick up your bill on unpaid UK taxes, and your mom in the States has to pay more tax to pick up your bill on unpaid US taxes.

Tell me how working in London as I do I can, " squirrel away all your income away into a tax haven"

The grandparent was making an analogy, but...

Use a "non-dom"! BVI or Jersey/Gibraltar/Mann, etc.

My understanding is that it's similar to money left outside of the US: with a UK non-domicile you can defer paying taxes on the cash as long as you leave it outside of the UK.

The catch is, of course, you have to be able to show the money was earned outside of the UK as well (e.g. investing -- see David Cameron's father and the Panama Papers). On that other hand if you open a regular pension investment account in the UK you can defer up to 100% of your annual income tax anyway, without having to jump through hoops or be really rich.[0]

0 - https://www.gov.uk/tax-on-your-private-pension/pension-tax-r...

The number of non doms in the uk is trivial so thats a very bad anology and you do have to pay a chunky levvy in lieu of tax.

You can deduct forensic taxes from US taxes owed so it's a long way from 35% most of the time.

Except most of the money is sheltered using legal tax avoidance ala Dutch Sandwich (nice job EU), so maybe 30%? Either way, CFOs do not like to waste money.

The EU is deepening the problems with non-territorial US taxes with its loony tax loopholes. Still, the USA could just end the problem entirely by going territorial.

That makes very little sense. Why would the US be entitled to money earned in another country by a non US entity?

I don't think companies should be able to operate subsidiary's because it's not a separate entity. This would prevent a lot of bad behavior and I am unsure of any net gains for society.

What are you talking about? EU is not deepening anything but rather actively combating tax loopholes.

Or more countries could go non-territorial like the US!

2) I do disagree there. It's a widespread misconception IMHO. Holding cash allows greater flexibility and resilience against bad times. It allows you to move quickly on surprising opportunities that have a short window, and insulates you from swings in the credit market. Lower cash holdings and greater reliance on future creditors make you more vulnerable to black swans. (True for both businesses and individuals.)

Policies that discourage cash holding "'cause investment is good" are failing to model the costs of being illiquid -- both individual and social. Taken to an extreme, this view would hold that the absolute worst I can do is produce but never consume.

3) The magic behind this argument is the same as the magic behind lowering interest rates: cheaper capital results in more investment and more jobs.

If you believe that corporations have a reasonable supply of projects they could fund, that on average funding these projects results in job-creation, and that these projects have varying levels of risk and return, then the argument follows. Based on these assumptions, there are likely to be many projects for which the risk/reward profile would suggest you fund them, except if you have to invest 40-50% more upfront just to repatriate your cash, the economics stop working. If you eliminate the tax, therefore, more of these projects will be funded and jobs will be created.

A reasonable follow-up question would be: how many jobs will be created? The $ at stake for the government is knowable I imagine, so it would be interesting to look at $/job or some such cost/benefit metric. This is getting too far down the toy model, but one answer might be: if the NPV of a project is >0, then 35% of that NPV is still positive, so the government should "fund" it by allowing the tax holiday (their discount rate is almost surely lower than everyone else's).

Giving a tax holiday now means that no company will bring its cash back in the future. No CEO wants to bring back a ton of money only to have Congress pass another tax holiday the next year. That's what the 2004 repatriation tax holiday has led to: a few jobs at the moment, but a lot of lost jobs in the long term.

Instead of tax holidays or jubilees, we should just institute a sensible tax policy.

There's also the sense of justice in that the offshore money has already been taxed in the countries it was earned in. Why should shareholders, investors, and the company have to pay twice? And who are you to say that money wouldn't be useful in the US? 35% return on investment per year is quite a lot to ask of your money. If you can do that regularly let me know, and you can take over my 401k.

If they aren't using it and have more than a few years of operational expenses stockpiled, they should turn it over to stock holders as dividend payments.

> The US tax code heavily punishes companies that hold cash in a variety of ways.

It would be nice if you provided an example. What, exactly, is a tax penalty which applies to holding cash?

Right there in the next paragraph it says: the business interest loophole and the accumulated earnings tax.

I would guess: in a "corporate wellfare" state, the lack of some tax break is regarded as a penalty. I.e. if there exists is a portfolio of available instruments, with tax breaks attached, into which the cash could be poured, and you don't do that, then you're penalized.

>> Apple, Google, Microsoft, and the like are holding masses of cash outside the USA.

a large part of this cash is from the tax not paid in countries in Europe, Asia, Australia.

America was always going to get a hand on this money and that seems to be the reason there has been no movement in international tax negotiations.

An American Cash repatriation holiday is way overdue now.. Tax that should have been paid to other countries will get paid in US.

If these companies had such pressing investment needs in the US they'd borrow against that cash at 2% and do it. Those two points are not sinking their investment plans. They do not have unfunded investment needs.

Why should they bring the money here tax free? In fact why shouldn't they pay taxes on foreign profits?

Let's flip the question. Why SHOULD a company pay taxes on foreign countries? Why shouldn't the foreign country get to collect the tax because the economic activity is completely part of their nation?

The US is the only developed nation that has this ridiculous tax system.


A corollary to this is if I buy an item from the United States and ship it to Ireland (where I live), then why should I pay tax on it? The customs officials are acting as rentiers in that case.

I'm saying no taxes need to be paid. I am saying that increasingly with the Net there is diminished moral rationale for some forms of taxation, leaving out the subject of the right of a government to levy taxes.

I think we'll increasingly see Henry George style taxation coming back into fashion as a result of this.

Arguably it was largely workers performing R&D inside of the US which resulted in the creation of these products. So there is at least a bunch of income, payroll, property taxs, etc. paid already inside of the US.

Now, if the company were to move all of their R&D to Bermuda & Ireland like they moved their IP, we could argue that they deserve to pay the ~0% corporate income tax on their overseas profits.

> Now, if the company were to move all of their R&D to Bermuda & Ireland like they moved their IP, we could argue that they deserve to pay the ~0% corporate income tax on their overseas profits.

This is actually the thing that politically prevents such taxes from being collected.

You have these companies that spend e.g. ten billion dollars on R&D that produces a hundred billion dollars in profits. Right now the ten billion dollars they spend on R&D gets taxed in various ways (payroll/sales/property taxes) in the place they do the R&D, which is very good for that place.

What happens if you then demand that on top of that, 35% of the hundred billion be paid to the same place? You just made it actually profitable for them to go to California, find some engineers, and pay them five times the previous market rate plus their relocation costs to move to Ireland and set up shop there.

Corporations are creatures of government which either should not be created at all, or which should serve the public interest.

Companies that are not corporations may be another matter...

Is 'tax penalties' the official name ?

No. I used it to mean paying high and unnecessary tax assessments.

There was a very interesting article in the NY Times earlier this year about this subject:

"For other industries, though, a dollar of savings is worth a lot more than itself. For pharmaceutical companies, a dollar in savings is worth $1.50. For software firms, it’s even higher: more than $2. This means that investors are behaving as if they trust the executives in these industries, like Larry Page of Alphabet, to be smarter about using that money than the investors themselves could be. ...

"Why? The answer, perhaps, is that both the executives and the investors in these industries believe that something big is coming, but — this is crucial — they’re not sure what it will be. Through the 20th century, as we shifted from a horse-and-sun-powered agrarian economy to an electricity-and-motor-powered industrial economy to a silicon-based information economy, it was clear that every company had to invest in the new thing that was coming. These were big, expensive investments in buildings and machinery and computer technology. Today, though, value is created far more through new ideas and new ways of interaction. Ideas appear and spread much more quickly, and their worth is much harder to estimate."

Source: http://www.nytimes.com/2016/01/24/magazine/why-are-corporati...

The implication is that big tech companies see some very disruptive trends coming down the pipeline, but they're not sure which specific idea or ideas should take most of the investment, and they're hedging their bets by hoarding cash for now. Maybe when the AI/automation revolution kicks into high gear, we'll finally see what they spend all this money on.

I like Warren Buffet's phrasing as cash is a call option with no expiration date. Standard finance theory is that companies should either invest the cash themselves, or if they can't find good investments, they should return it to their shareholders so the shareholders can deploy it elsewhere. However if the management of these companies thinks that the ultimate return on the cash they hold will be greater even given the time value of holding a zero-return investment for years then it makes sense to wait to deploy. I happen to think they're wrong and that they'd be better off returning most of the cash to their shareholders but that's for the respective boards to decide.

Something I don't understand: why would a company ever return cash if they don't have to? Isn't it better to have it than not?

Think of the "company" as fictitious. All the company is, is the combined assets of shareholders. So the shareholders decide if they would rather have the cash in the corporate entity or in their own pockets.

If a company has excess cash, and few good projects (NPV>0), returning money to stockholders (dividends or stock repurchases) is GOOD.

If a company does not have excess cash, and/or has several good projects (NPV>0), returning money to stockholders (dividends or stock repurchases) is BAD.

Read more here: http://pages.stern.nyu.edu/~adamodar/New_Home_Page/lectures/...

Shareholders get nervous when companies hold too much cash, because they fear that management will blow it on stupid acquisitions. This ultimately hurts the value of the company.

Management is usually granted stock and/or stock options, which aligns their interest with the other stock owners.

Because it used to be that companies that don't return dividends back to share holders weren't worth much. What's interesting is microsoft's sales in 2005 and 2015 are both 12B. The other companies at least have none flat revenue numbers.

There are several reasons.

A couple could be shareholders believe they have better uses for the money elsewhere and to keep management disciplined (i.e. too much cash makes management reckless).

Think about if you were a partial owner of two businesses. One business has a lot of cash but isn't growing. The other business is growing but doesn't have a lot of cash. As a partial owner, what would you do?

Well they do have to return the cash if the shareholders demand it since the company doesn't own itself, the shareholders own it.

Warren Buffet's genius idea is to have his insurance companies producing steady flow of incoming cash in both good and bad times for him to invest. He has always cash coming in. Berkshire Hathaway has cut banks and finance sector and their margins out from Buffets investing scheme.

MS, Apple and Google are in different situation. They want to hold cash to protect and grow their network externalities. It's zero sum game in long term.

There is a real weight of gravity around that much cash. I would guess the returns of having 10x the cash of your nearest competitor, and publicizing that fact exceeds T-bill returns for instance.

Yeah true, and Apple's "Cash" isn't just cash but likely includes tons of government debt and other low-risk securities that return somewhere >0. They have an exceptional treasury team, which probably my favorite fun fact about Apple, operates a separate company called "Braeburn Capital".

Article about their cash woes when they "only" had $120B to invest: https://www.theguardian.com/business/2012/oct/26/apple-inves...

Apple was an outlier in this sense, because for the longest time they were sitting on a mountain of cash. They ended up paying part of that out as dividends when Cook became CEO.

A serious question: does anyone -- management, shareholders, analysts, anyone in the picture at all -- seriously think that these companies will actually find a way to invest a nontrivial portion of the cash piles they're sitting on? (Bearing in mind that to date, year after year after year, they're unable to invest quickly enough to prevent the pile from continuing to accumulate, let alone spend it down.)

I think the whole Apple car rumor is analysts trying to come up with a conceivable way they could spend a large portion of their reserves.

There is still something very apple-ish about that rumor. It might seem weird, but cars are becoming more like mobile phones with wheels. The mobile phone is the latest in the personal computing vision apple had (well, jobs). The car being an extension of that might be a natural choice for them to follow. A self driving car that picks you up whenever and wherever is to the car what the smartphone is to mobile phones. Who knows? They have the money and talent for a good effort.

I think the rumor has some merit though.

Apple now have their own mapping effort similar to Google and I remember watching a video at a Google sponsored event where it was mentioned that for self-driving cars to be viable, you first need a mapping solution which Google had been building for several years as Google Maps.

Have there been any incredibly disruptive & profitable markets in the past 10 years? Would hanging onto cash help solidify your place in the next disruptive & profitable market? At the end of the day, the question for these companies is: can you afford not to have cash available for The Next Big Thing?

There's cash available for The Next Big Thing, and then there's $215B (Apple's current cash). They could buy, say, GM outright (market cap: $48B) and barely make a dent.

Smartphones have exploded in the last 10 years....

Smartphones have exploded in the last 10 years...

The lithium ion battery problems are mostly under control now.

and yet Microsoft has been unable to use their cash to secure a foothold in the smartphone market.

My understanding is they get ~$1 billion/year from licensing patents to Android manufacturers.

Anyway, I wouldn't count them out just yet. It took them 5-6 years to catch up to Google Docs and these days, I often consider using Office 365 because it's local AND syncs to the cloud automatically.

They do, if though nothing else then through multi-billion acquisitions. Another thing is that we all know crises come every now and then. Being tight on cash when it hits the market means you'll have to let talent go to your competitors, slow down infrastructure growth, reduce research freedom.

Sure, these are reasonable arguments, which are commonly used. Clearly this justifies holding on to some cash. But I question whether it justifies holding on to this much cash. At some point it has to reach diminishing returns.

The problem with spending it on acquisitions is once you reach a certain size buying other companies becomes difficult due to regulatory concerns.

Alphabet seems to be starting to find a way. Say they have a working, regulatory approved self driving car, it'll take tons of money for scaling. Same for internet balloons, and probably other stuff.

They have enough experience with Google Fiber now. If they really wanted to put some of that cash to work they could start building fiber networks in 10 cities per year and blanket the top 50 metro areas (just to side-step arguments about how big the US is and the expense of deploying to rural areas).

The reality is Google Fiber exists to scare the existing players away from squeezing too hard, but not as an actual plan to create a large profitable business to deliver actual competition. Google has orders of magnitude more capital than they would need to do that if they wanted.

I'm only guessing,but since Google has no big advantage in the field of fiber, it means that their business there won't have decent margins(or returns-on-capital) like they are used to - which would make them less interested.

Also another reason they may worry, is that maybe phased-array antennas may become competitive soon, so investing on fiber for the long term might be risky.

On the other hand, stuff like self-driving cars should have a different competitive/economic story, so scaling may look different.

I'm very worried those next big things aren't coming. If they do, they'll come from China and not the US.

Why? The low government spending on R&D, from the US. So much technology came from government R&D. I just don't think private R&D is enough for the "next big thing".

Yet according to the article the vast majority of their holdings are trapped overseas because of onerous taxing principles, the US being one of the nations to tax companies for profits regardless of where.

Of course with this much overseas and its increasing value how much must be stashed before you exceed the value of the company in question. On a completely different tangent, how much does it take to intimidate your competition to nothing in fear you are waiting to jump?

I understand their motivation - just like I understand Hitler's motivations.

Hoarding cash is extremely bad from a macro-economical standpoint. The govt should be alarmed of this type of development.

There is a reason why we need 2% inflation - it is to push people with money to spend it or risk loosing its value. Its what keeps the economy churning and keep people employed.

This massive cash hoard is essentially one entity holding on to all the gold in the kingdom - resulting in deflation in the rest of the economy.

These companies are waiting for a disruption, and will just use their cash hoard to buy the company that threatens their monopoly ? How is this not a massive issue of anti-trust ?

Godwin's law kicked in again. I am impressed how it makes its way into every discussion.

> it is to push people with money to spend it or risk loosing its value.

and yet, what these big, very smart companies are doing is not investing. they're just sitting on it.

it seems a positive inflation rate, as an economic growth strategy for a nation, can only do so much. it's also helpful if companies and investors actually see some enterprises or industries worth investing in, or worth creating from thin air, in the current economic environment.

additional benefit of inflation: it makes existing debts easier to pay as time goes on, thus reducing the probability of a default (or a large collection of simultaneous defaults). that is, a small positive inflation rate is good because it means we aren't having deflation, which makes debt harder to pay off.

I think Occam's razor applies here: It's not that management teams have big plans for the money, or that they "believe that something big is coming, but... they’re not sure what it will be". It's that they don't know what to do with the money and there isn't much pressure to disburse it.

Cash hordes are reflected in the share price, so investors can monetize the cash by selling a few shares. If you're a "buy and hold" investor you don't want a dividend because that's a taxable event.

When a company like Apple has $200B in "cash" overseas, where do they put it? I mean, is there literally a giant vault of physical cash or gold somewhere or do they buy 6 month T-Bills or just put it all in a private bank?

BTW: $200 billion in $100 bills weighs 2,200 tons.

It is all a legal fiction. The money is deposited with banks in NYC, so it's all here in the USA. Legally it is deposited in the accounts of "Apple Ireland", "Apple China", etc even though those subsidiary companies are wholly owned by Apple Inc, a US company.

To be clear I'm in favor of a lower corporate tax rate and making up the difference in taxes on those worth >$10 million. Money sitting idle in bank accounts doesn't even do any good for the "capital" part of capitalism, let alone put money in consumer's pockets. It represents a sink, reducing the amount of money available to the rest of the economy.

(A separate issue is the fact that accumulating money into corporations or the top 1% of individuals is bad for the economy as economies function on consumer spending, either external or internal. You get much greater leverage by taking money away from them and giving it to consumers, who will immediately spend most of it and ultimately putting it back into corporate/1% pockets anyway. The ultra-low taxes and stagnant wages in the US are a form of killing the golden goose).

> I'm in favor of a lower corporate tax rate and making up the difference in taxes on those worth >$10 million.

Doesn't that mean that each rich person would just start a tiny personal "corporation" that owns a lot of very nice things and gives its one employee free access to the company car, yacht, mansion, etc?

This is done all the time. Even on the smaller scale with middle/upper-middle class families; they have LLCs or some other legal avenue that owns their car, their suburban home(s), etc. It's not just the rich people who do this - it's not hard for someone who's just intelligent to make the right choices in both protecting assets as well as diversifying their wealth.

It will lead to a lot of that but there are limits. Personal use of car/etc is considered a taxable benefit, only 'business use' can be expensed but it could be abused.

You can do that, but all of those things are taxable compensation which you will still need to pay taxes on.

People already do this. Both with LLC and trusts.

Most of Apple's "cash" is in various securities. If they follow the typical pattern, the vast majority will be US Treasuries and other sovereign debt.

Apple has "only" $11 bil in cash & short term debt. Of the cash portion, the vast majority (99.9%+) will be in bank accounts.

Most money in the world is electronic, not paper :-)

Is it apropos on HN to link to cite one's own comment? I made a comment about this a month or so ago that I think is relevant: https://news.ycombinator.com/item?id=11592455. Essentially, I think this cash hoarding is motivated by fear, fear of being "disrupted" and becoming the next RIM or Palm or whatever: in a dominant position in year N; dead as a doorknob in year N+3. And this is the toughest kind of fear, because it's perfectly reasonable but can still get pathological when taken too far.

>Excluding the energy sector, tech comprised 40% of non-financial free cash flow in 2015, similar to the 42% average since 2007.

This writeup is a bit sensationalized. They try to argue that "tech" is the biggest by ignoring the actual two biggest. This is like arguing that men are the majority population, 100% of the remainder after women.

Well, what are the numbers for the others sectors: energy and finance? Would like to know for the sake of comparison.

As someone not an US citizen, it is because US are running into 2016 election that we have to be constantly reminded by the media there are lots of US companies holding huge amount of cash overseas?

The amount of these article popping up is just getting silly. And yet not a single one has proposed a (fair ) solution to the problem / US Tax Code. Everytime I just end up skip read the article or go straight to HN comment for some of the best thoughts around.

Maybe a stupid question, but why doesn't Apple start a vc fund?

Even a VC fund would have a hell of a time investing that much cash. The biggest VC funds are "only" in the single digit billions per fund.

They don't need it?

Define 'need'. I assume the average VC fund returns more than treasuries or nobody would do it.

They could even give the companies they invest in preferential treatment at Apple (instant iOS approvals, secret APIs, whatever) to give them a competitive edge.

all the very rich people don't really need to keep investing

What is meant by cash in this context? I'm assuming a lot of it is invested in financial vehicles with varying degrees of risk and liquidity? It's not just sitting in a savings account earning 0.01% interest, is it?

The cash is sitting in a bank account in NYC under the name "Apple Ireland" or "Apple China", or invested in US stocks, bonds, etc with US brokerages, or lent to "Apple Inc" with corporate bonds.

So those 3 could cover federal spending for almost 2 weeks.

Once again the boatloads of cash story rears its head. Except that the figures stated are inflated, most certainly in the case of Apple who already spent a good amount of that cash by issuing debt to pay for dividends and stock buybacks.

Don't share holders want some of this money back? 200 billion in cash just sitting there is not doing anyone much good.

I am curious as to how links on HN work. I am certain i posted this very link two days ago. Does HN now allow multiple posts of the same link?

Yes. I'm on my phone so I can't find a link right now, but I've seen multiple people mention that it's OK to re-post until it hits the front page. Sorry for the lack of sources.

I feel like I read a similar headline with the same figure but it was 23% among technology corporations cash...

When I hear the phrase corporate profits, I think of the fact that they aren't really profits at all. According to a UN report, the amount of environmental damage the companies caused is on par in dollar terms than the profits they made. They just exchanged something for something else, except that the global population has to eat the losses in the form of pollution. Nothing is free in this world unfortunately, not even corporate profits.


Even hunter-gatherers have HUGE impact on the environment. They often set fires to clear underbrush in forests (making hunting easier) or wildfires in grasslands to drive herds of animals (again for hunting). They move around and introduce new plants, they divert streams, they drain swamps, etc, etc. pre-industrial man was responsible for the extinction of dozens (if not more) species. The idea that man's impact on nature is recent is laughable. We have been shaping our environment for tens of thousands of years.

Thing is, other animals do this too. The canonical example is beavers and their dams. But recent detailed study of ecosystems have shown that the impact of wolves is astounding. The same is probably true for most other species.

There is no "balance of nature". Nature is dynamic and ever changing. Man is a part of that dynamic. Our advantage is that we are aware of our impact and can manage it.

Wealth from industrialization allows societies to take steps to clean up previous damage. The rivers and lakes of wealthy nations are cleaner now than at any time in the last 100 years. The US and western europe have more forest cover now than in 1900. The air is MUCH cleaner too. All that requires the wealth that industrialization brings. Poor people are simply too worried about feeding their children to demand that there are pretty forests and parks to go camping in.

> Wealth from industrialization allows societies to take steps to clean up previous damage. The rivers and lakes of wealthy nations are cleaner now than at any time in the last 100 years. The US and western europe have more forest cover now than in 1900. The air is MUCH cleaner too.

The price of cleaned up Western countries is that the dirty stuff (mining rare earth metals, mining for coal and iron, ore processing, lots of chemical production processes, producing oil) shift from Western countries into poorer countries. Africa suffers from massive pollution due to uranium mining, China has a truckload of environmental problems, and India isn't far behind.

> Rivers

Rivers are doubtless cleaner than they were 400 years ago, too; it's enormously valuable that we can now treat human waste properly. Dunghills, referenced all the time in historic texts (like Luther's "snow on a dunghill" image), were literal piles of human feces. Imagine where they went when it rained, and remember how a lot of waste was just dumped onto streets, into water, and so on; 50 million people dumping raw sewage into rivers or storing it in heaps, will pollute the environment much more severely than 1 billion people with plumbing, running water, and centralized sewage-treatment plants.

You know when I hear a people speaking like this, I can't help but think about that scene from "The Life of Brian" where the rhetorical question of "What have the Romans ever done for us?!" (https://www.youtube.com/watch?v=ExWfh6sGyso)

It's terribly simplistic to look only at industrialization problems and completely neglect to acknowledge the upsides. Is there pollution and would I like there to be less, sure. Having said that would I want to give up the safety, food security, medical advances, conveniences, etc. that make life worthwhile so that I could live in pristine, untouched nature? Not a chance. I've life is substantially better because I live in an industrialized society and I'll take the pollution so long as it comes with all the good in my life.

The issue, in principle at least, is that those who accrue the benefits of pollution don't bear its costs. Yes, it might be nice having a Tesla outside your Atherton villa, but that is a cold comfort to a thousand Bengali kids who drown in a flood.

The principle is bull and intellectually dishonest. It's not about Teslas, but about the nails that hold most homes together: factory made. The trucks that delivered the nails and the food the workers eat... Factory made. As you sit bemoaning the evil of industrialization, using tools only made possible by that same industrialization, are you not profiting from the very same pollution you condemn? As far as those not receiving those benefits... It's not zero sum. Am I fortunate to live in a country that even still recognizes some sense of the individual and is also a country of laws? Yes. But that good fortune is not the result of someone not receiving that good fortune. My living any lesser quality of life will do me no good and will not improve the life of those poor Bengali kids in any way.

Without disagreeing that some portion of global profit comes from "taking things from the planet", do you think that all the value we've created since emerging from Africa somewhen between 50.000 and 100.000 years ago can be compensated with environmental damage? Or is it a recent trend? If we were to plot a graph, where the X axis is the time and the Y axis is profits/damage, how would it look like?

What about mathematics, arts and science? It sure has incredible value and eventually translates into corporate profit. For the most part I cannot see the corresponding environmental debt.

And to be more specific: what kind of damage did the three mentioned companies do?

That might be the case for some companies and corporate profits, but certainly not all or even most. To give one example, Facebook's profits in 2015 were almost $4 billion. They share their carbon footprint details, and other environmental impact details at https://www.facebook.com/green/. Their environmental impact is small, and their profits enormous.

That's not what your link (quoting an unpublished study) claims:

"The figure equates to 6-7% of the companies' combined turnover, or an average of one-third of their profits"

At the end of the day NOTHING in our world exists in a silo. Everything exists within a system. Changing one thing in a system will surely affect all the inter-dependant components. Sometimes the tradeoffs are worth it and sometimes they are not.

As someone here mentioned, even hunter-gatherers had a huge impact on the environment.

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