(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.
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.
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.
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 , 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.
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.
I have never heard of this. Anything I can read or Google about this?
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.
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.
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.
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.
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.
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.
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.
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.
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
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.
> 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?
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.
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.
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.
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.
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  "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 . 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.
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.
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.
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".
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.
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.
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.
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.)
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.
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.
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.
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).
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 - https://www.gov.uk/tax-on-your-private-pension/pension-tax-r...
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.
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).
Instead of tax holidays or jubilees, we should just institute a sensible tax policy.
It would be nice if you provided an example. What, exactly, is a tax penalty which applies to holding cash?
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.
Why should they bring the money here tax free? In fact why shouldn't they pay taxes on foreign profits?
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.
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.
Companies that are not corporations may be another matter...
"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."
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.
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/...
Management is usually granted stock and/or stock options, which aligns their interest with the other stock owners.
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?
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.
Article about their cash woes when they "only" had $120B to invest: https://www.theguardian.com/business/2012/oct/26/apple-inves...
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.
The lithium ion battery problems are mostly under control now.
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.
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.
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.
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".
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?
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 ?
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.
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.
BTW: $200 billion in $100 bills weighs 2,200 tons.
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).
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?
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 :-)
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.
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.
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.
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.
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 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.
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.
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?
"The figure equates to 6-7% of the companies' combined turnover, or an average of one-third of their profits"
As someone here mentioned, even hunter-gatherers had a huge impact on the environment.