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Apple Raises $10 Billion in Debt Ahead of Trump's Plans for Tax Holiday
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A tax holiday for Apple will result in MORE tax money for the US government. Right now Apple is paying 0% in taxes on the money overseas. 10% taxation on bringing $260 B home is $26 B more taxes. The middle class is not making up the 25% difference because the 35% rate doesn't apply to money kept overseas.
Math:
10% of $260,000,000,000 > 35% of $0
The peasants aren't hurt. The banks who are currently holding the cash for Apple and helping Apple borrow money with bonds will be hurt.
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Yes and no. Yes on why they do this, but no on tax rate issue.
First, U.S. corporations are credited towards their U.S. tax bills for foreign taxes paid. Granted much of their profit may well be run through overseas tax havens so they are stockpiling a lot of barely taxed profit overseas. But that's as much a function of the existence of these tax havens as it is U.S. corporate tax rates.
Second, few U.S. corporations pay the 35% rack tax rate. Apple's effective tax rate is closer to 25% because of credits they earn against their taxes. So if the corporate tax rate is lowered to 25% and nothing else is changed in the tax laws, the effective rate is going to be around 15%.
Guaranteed we are going to continue to hear about how high the corporate tax rate is in the U.S. but we are going to hear almost nothing about the other components of how those taxes are calculated. We are going to hear about the importance of repatriating a lot of overseas profits at little to no tax cost, but not why this matters to anyone who is not a stockholder. This smoke and mirrors game will fool plenty, but not anyone in the corporate boardrooms, where they know a gimme when they get one. And are they ever going to get one.
The 2004 version was deemed a failure by almost everyone. Holidays are not a substitute for sound tax policy. Even Heritage didn't like it. I don't normally quote them. I'm doing it here because they generally advocate in favor of low tax rates. It's also not 35% of 0. Some of it enters the US economy indirectly via US banks through foreign subsidiaries, which can be loaned out for further investment
True our current tax policy is why this is an issue in the first place. Multinationals can shop for the best government these days. Moving the corporate office to another country isn't hard. A lower, more competitive rate with less loop holes would be ideal, but the government likes to try and control things with loop holes.
A tax holiday is a band-aid solution, but it is also easier to pull off than true tax reform.
I'm not saying Apple pays taxes on $0, I'm comparing the money that Apple isn't taxed on now that would be taxed on in the holiday. A small % of something is still more than a large % of nothing.
Sure, it's not illegal but taking advantage of tax loopholes as one of the most profitable companies isn't ethical especially as a company that seems to take moral high ground on other issues.
Also, it's a weak argument that everyone else is doing so it's ok because it is not ok to break speed limit since others are doing it.
So ethically, Apple should OVER pay its taxes reducing it's profits and therefore return on it's stock. The largest of amount which is held by the retirement funds of working people around the country.
So hurting common people's retirement is ethical because... giving money to the government is intrinsically good?
It's statements like these that make tax policy discussions so unproductive, and the principal reason why our tax policies are so illogical.
Omg, here we go....
You do realize that every cent of that $ was ALREADY taxed in the country it was made in, yeah?
So... you're upset that Apple doesn't want to pay taxes; then pay taxes?
Would you?
Disagreeing with the idea that Apple should pay all of it's taxes and then pay some nebulous additional amount for "fairness" or to be "ethical" is unproductive?
Those aren't actual reasons for Apple to pay extra taxes. They are bumper sticker statements focused on feeling good about one's position without any real substance.
I have given Apple my money with the expectation that they will return to me the largest return that they can legally produce.
If they don't do that they are violating their fiduciary duty to me and under the agency principle are not acting in my best interests, both of which are ethical violations.
That's why they are doing it, because using someone else's money irresponsibly is tantamount to stealing from them.
The reason everyone else is doing it is because not doing it is actually unethical.
That's precisely how I take your argument: a feel-good position with a dose of reductio ad absurdum thrown in for good measure. Perhaps you could explain your thoughts on this more completely and it could be taken another way.
Yes I was pointing out the absurdity of the many posters saying that Apple should pay more in taxes for reasons like "fairness" or "ethics" or other meaningless phrases without any other basis for A) why they should pay more and B) how much more is enough.
For instance, the item I responded to that you got all huffy about:
"Sure, it's not illegal but taking advantage of tax loopholes as one of the most profitable companies isn't ethical especially as a company that seems to take moral high ground on other issues."
- This person is admitting that Apple pays all of the taxes legally required, so rule of law is not sufficient.
- Calls a legal tax deduction a pejorative 'loophole'.
- Suggests that use of a deduction by a highly profitable company is unethical.
- Suggests that a company taking a moral stand on another issue such as gay marriage should impact the amount of taxes it pays.
- Is every IRS deduction a 'loophole'?
- Is taking a tax deduction always unethical or just the ones companies making a lot of profit?
- Is a lot of profit absolute and revenue based or profit margin based?
I've never heard the rule of law described as a feel good position before, but it be crazy times. Feel free to explain your position as well instead of simply attacking mine.
Corporations like Apple hold the money overseas partially because they're hoping for a tax holiday, same as individuals holding stocks with unrealized gains. Looks like they're getting their chance. I think it's a bad precedent to set, but it was already set a while back.
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Even as a band-aid solution, the last one was considered a failure and a net federal revenue loss. Given those issues, I would repeat that it's a bad solution in general, regardless of tax policy. If politicians want to quibble over how much is held overseas, they should be forced to implement any changes in the form of permanent ones. You seem to assume the only change to be a repatriation of funds, which isn't likely.
This is one of these moments when we get to ask ourselves some fundamental questions about the purpose of tax policies, and maybe, why we have taxes and government at all.
For the last 35 years or so we've been running an economic experiment. The hypothesis was, and still is: if you free up capital, everyone will benefit. This is called supply-side economics, AKA, trickle-down. What it has succeeded in doing over those 35 years is to steadily concentrate wealth in the hands of the already wealthy and leave pretty much everybody else with less. If it has enlarged the pie at all, even more of that pie has gone to those who already have the most. If supply-side economics was supposed to be of broad benefit, then it has clearly failed, miserably.
So now we look at all the cash corporations such as Apple have socked away, not just overseas, but in the U.S. as well. If Apple was able to repatriate a big part of their overseas cash hoard, what expansion of their business would they be able to undertake that they cannot do today? I think the clear answer is none. They would be able to buy back more stock and pay a larger dividend to shareholders. Anyone who thinks this has the same economic affect as expanding plant and equipment didn't take Econ 101. The reality is, it isn't designed to benefit everybody or the economy broadly. It is designed to comfort the already comfortable. That's the secret, hidden in plain sight.
And just for the record I say this as someone who is a stockholder who could very likely find myself with more value in my portfolio as a result. Yet, I have no problem understanding that something that might make me fatter and happier is not necessarily good economic policy. The sad part is know it will happen and it will be sold as the same old bill of spoiled goods.
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I'm not sure I follow. If companies don't repatriate funds, there is no tax gain but there isn't loss. The current situation just continues.
Ah a well stated position. My thanks.
I agree with much of what you say except the "They would be able to buy back more stock and pay a larger dividend to shareholders. Anyone who thinks this has the same economic affect as expanding plant and equipment didn't take Econ 101."
If Apple pays dividends instead of building a plant, yes Apple does not create jobs (as an example econ benefit) directly. However, the shareholders (rich or otherwise) now have more money to spend or save. If they spend it on lattes or Ferraris or whatever they creating jobs at the companies making those products. If they save it, the bank will then lend it to others that are A) buying expensive products which create jobs for the people making those products or B) starting or expanding a business - perhaps with a new plant. (Apple's money is currently being loaned out by banks or invested in other companies similar to this individual example).
Just because money goes to a bank or a rich person doesn't mean its next stop isn't in the pocket of a factory worker making a luxury car or barista at starbucks.
Interesting that this website classifies this as a "political" issue. Why "political". Who is to say this has anything to do with political parties? Why is this not just classified as a morality issue. Or decency? Or sustainability?
This is how the media warps minds....
Also "Apple" is a fictitious entity. "Apple" does not gain or lose or save money. Rather there are specific groups of human beings...e.g. Executives or specific shareholders, and of course ordinary citizens who depend on tax revenues to fund social services and infrastructure....who stand to gain or lose by this decision...which is made by human beings.
Cut it out with the veils and smog....
This is how the media warps minds....
Also "Apple" is a fictitious entity. "Apple" does not gain or lose or save money. Rather there are specific groups of human beings...e.g. Executives or specific shareholders, and of course ordinary citizens who depend on tax revenues to fund social services and infrastructure....who stand to gain or lose by this decision...which is made by human beings.
Cut it out with the veils and smog....
So it would seem Apple is doing all they can to avoid paying higher taxes but some people would bash Trump and others for not paying their fair share.
Blame the laws, they're the ones that need changing.
Blame the laws, they're the ones that need changing.
No the taxes are what they are. The people who run Apple, a US company, is just avoiding puting the money in a US bank account. That's avoidance really.
Again save the spin for dummies. This is all about a small handful of multi millionaires making sure that they.....no, more like their grandkids.,,.won't ever need to work.