“BlackRock Inc will scrutinize how companies plan to use the cash they bring back to the United States as part of a tax holiday backed by U.S. President Donald Trump, CEO Larry Fink said in a letter distributed on Tuesday,” Trevor Hunnicutt reports for Reuters. “Companies such as Apple Inc, Pfizer Inc, Microsoft Corp hold nearly $1.8 trillion overseas, Moody’s Investors Service Inc estimated last month. By doing so, they avoid a 35 percent U.S. corporate tax rate.”
“BlackRock oversees $5.1 trillion in assets, ranking as a top shareholder of many of the world’s largest companies. It votes on the composition of those companies’ boards as well as on governance proposals from management and shareholders,” Hunnicutt reports. “‘If tax reform also includes some form of reduced taxation for repatriation of cash trapped overseas, BlackRock will be looking to companies’ strategic frameworks for an explanation of whether they will bring cash back to the U.S. and if so, how they plan to use it,’ Fink wrote in an annual letter to the CEOs of the S&P 500. ‘Will it be used simply for more share buybacks? Or is it a part of a capital plan that appropriately balances returning capital to shareholders with prudently investing for future growth?'”
Hunnicutt reports, “Fink, who had donated to Democratic presidential candidate Hillary Clinton, recently joined an advisory council to Trump that includes several other CEOs.”
Read more in the full article here.
MacDailyNews Take: Could not shareholders themselves use said capital to prudently invest, or even – gasp! – spend (buying major appliances, building additions/homes, buying cars, boats, homes, etc. and, BTW, paying taxes on most if not all of those purchases), thereby stimulating economic growth? Companies’ investments are not the sole lever of growth.
And, again, as we wrote last September: Let’s not do another “one-time-only” (smirk) repatriation holiday. Let’s fix the broken U.S. corporate tax code instead. Let us eschew the easy way out, that fixes nothing in the long run, and choose to do the hard work instead.
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