Apple borrows billions while sitting on massive overseas cash mountain

“Apple has fat stacks of cash stashed overseas, but that hasn’t stopped the company from borrowing billions to give money back to shareholders,” Ethan Baron reports for The Mercury News. “Why borrow when sitting on $240 billion in cash?”

“‘One five-letter word: taxes,’ said Steven Rosenthal, a senior fellow at the Brookings Institution’s Tax Policy Center,” Baron reports. “Apple has $240 billion in cash held overseas, out of total cash reserves of $256.8 billion, according to Securities and Exchange Commission filings.”

“So far in 2017, the Cupertino tech giant has issued unsecured notes three times: on May 5 for $7 billion; on Feb. 15 for $1 billion; and on Feb. 3 for $10 billion, according to company filings with the SEC, for a total of $18 billion,” Baron reports. “That borrowing followed $23.9 billion in unsecured debt raised last year.”

“Bringing the money home would put Apple on the hook for a U.S. federal tax rate of 35 percent,” Baron reports. “Apple’s borrowing this year carries interest rates of 1.6 to 4.3 percent, a fraction of the cost of repatriating hoarded funds.”

Read more in the full article here.

MacDailyNews Take: Obviously, the U.S. needs tax reform yesterday.

We’ll see where it all ends up (the corporate tax rate won’t end up being 15% as proposed by President Trump, but it may end up being 20-25%, which is certainly better than the stifling 35% it is now).

As we’ve been saying for many years now, the U.S. corporate tax rate is way too high. Obviously.

Under the current U.S. corporate tax system, it would be very expensive to repatriate that cash. Unfortunately, the tax code has not kept up with the digital age. The tax system handicaps American corporations in relation to our foreign competitors who don’t have such constraints on the free flow of capital… Apple has always believed in the simple, not the complex. You can see it in our products and the way we conduct ourselves. It is in this spirit that we recommend a dramatic simplification of the corporate tax code. This reform should be revenue neutral, eliminate all corporate tax expenditures, lower corporate income tax rates and implement a reasonable tax on foreign earnings that allows the free flow of capital back to the U.S. We make this recommendation with our eyes wide open, realizing this would likely increase Apple’s U.S. taxes. But we strongly believe such comprehensive reform would be fair to all taxpayers, would keep America globally competitive and would promote U.S. economic growth.Apple CEO Tim Cook, May 21, 2013

SEE ALSO:
Apple’s unequaled $250 billion cash pile draws calls for buybacks, acquisitions as President Trump’s tax revamp looms – May 1, 2017
President Trump’s tax reform plan includes deep cuts in corporate taxes – April 26, 2017
Apple could be primed for profit explosion under President Trump’s big tax cut – April 26, 2017
Analyst: Apple could double dividend, buy Netflix with repatriated cash under President Trump’s U.S. corporate tax changes – March 17, 2017
Apple raises $10 billion in debt ahead of President Trump’s repatriation tax plans – February 3, 2017
After Apple’s blowout earnings, the Street looks toward ‘iPhone X’ and President Trump’s tax reforms – February 3, 2017
President-elect Trump’s corporate tax reform expected to have some positive impact on Apple EPS – January 14, 2017
Exploring Apple’s tax situation under U.S. President Donald Trump – November 21, 2016
Morgan Stanley: Apple stands to benefit the most from President Trump’s corporate tax plans – November 11, 2016
Apple and U.S. President-elect Trump: Can a tax cut for overseas cash heal wounds? – November 10, 2016
Donald Trump plan calls for cuts in corporate taxes, personal income tax rates – August 9, 2016
Barring a tax holiday, Apple will need to raise over $50 billion in debt the next 2 years – July 15, 2016
Cramer: Apple’s Tim Cook is ‘patriotic’ on taxes – December 21, 2015
Apple CEO Tim Cook is absolutely right – and wrong – on U.S. corporate tax policy – December 20, 2015
Apple CEO calls corporate tax rap ‘total political crap’ – December 18, 2015
Apple avoids $59.2 billion U.S. tax bill – October 7, 2015
U.S. companies now have $2.1 trillion overseas to avoid corporate taxes – March 4, 2015

15 Comments

  1. All the Demacrats want is your money. If they keep the corporate tax too high then the money will remain over seas as it is now an nobody will profit. A smaller tax is still better than none at all.

    1. You do realize that the President, Senate and House is ALL Republican controlled, right? Democrats can’t do anything but cry about never being in power ever again.
      Republicans should hold a vote JUST on repatriation and get it done. Try something simple and straightforward and common sense for once.

    2. Actually the market does better under Democrats than under Republicans. The job market also does better. Workers do better.

      The Republicans have a great scam going on. They claim to be better at Foreign Affairs, National Security and the Economy. The record shows they do poorly at all of the above.

      Jet Bush had the audacity on the stump to claim his brother “protected us” even though 9-11 happened on his watch. This even though the public record shows the incoming Bush Administration was warned by the outgoing Clinton Administration that the number one security threat was OBL and encouraged them to meet with Richard Clarke – the Counter-Terrorism guy in the West Wing who was a Republican and had served since Reagan as soon as possible. Bush and his people met Richard Clarke on September 12, 2001.

      The last time a Republican was a President with a balanced budget was 1969 and that was after a Democratic Congress passed a tax surcharge. The Balanced budgets under Bill Clinton came after Democrats in Congress reversed part of Reagan’s tax cuts. That tax bill cost many Democrats House seats in the 1994 election cycle, but the revenue combined with some spending cuts balanced budgets until a Republican Congress and Bush restored them in wartime- opening up deficits. Had we kept the tax schedule and spending levels from 1999 under Clinton we would have erased the National Debt.

      The Bush recession wiped out the measly job gains of his 8 years in the White House. The only Republican in recent times to have significant job growth was Reagan and he left office almost 30 years ago. When Obama took over from Bush the DJIA was on the 6000s and was more than triple that the day he left.

      The bottom line is Republicans suck at economic, trade and tax policy unless you are in the 1%. Do a little reading from verified sources and you will see their claims do not match their rhetoric.

      1. Check out modern monetary theory. Money is really just an illusory construct by the government that determines the priorities of the society. Right now, the priorities are so out of balance in favor of super rich and corporate executives, the only way to return to a healthy society is for the government to raise taxes on top earners and spend as much as it takes to lower jobless rates (this will naturally put a lot of positive pressure on wages). Deficits are misconstrued as a bad thing; as long as the ones buying govenment bonds are mostly american citizens, then it is just putting positive weath back in to private capital. U.S. government owing 20 trillion just means that there are people and companies out there that have an extra 20 trillion in possitive net wealth. If the government paid back all its debts, it would either trigger inflation (by creating 20 tril out of thin air, as it can do) or put a drag on the economy (by taxing way more than spending).

        What really needs to happen is the opposite of the trump tax plan: High taxes on the richest and high spending on everyone. The Laffer curve has republicans fooled: The reality isn’t a perfect curve, and we’re on the lower half of the curve, not the upper half. Data has already proven that extra wealth in the private sector does not get reinvested in growth nearly as much as it gets put away and spent on the self, so regressive tax plans will just pile up more wealth with the super rich. A 60% marginal rate above the 1+ million/year mark is a good start. Estate taxes should increase as well; our country is not about old-money families, but rather about entrepeneurs growing new businesses. Finally, we should cap mortgage interest deductions to $500,000 so people don’t buy $5 million homes and get massive tax breaks on the huge interest payments for their mansions. When executives and CEOs see that their huge paychecks can no longer be safely banked without huge taxes, they will realize that it makes more sense to send a larger percentage of the company money downstream to middle managers and base employees.

        1. Money is not illusory. When I made my last illusory payment to my Bank my house was paid off in full. When I pay my taxes and other bills in illusory money I get utilities, insurance and services like roads, fire protection, police and EMS.
          I understand the theory and understand inflation at some level is good, but Republicans bitch endlessly about debt and deficit when they are not in charge or when opposing anything they do not like that costs money, but have no problem running up debt to finance tax cuts (tax spending) for the wealthy or corporations or to feed the Military-Industrial Complex. The bald faced hypocrisy is stunning.
          As to politics, the first Campaign I worked on was Ronald Reagan in 1980 while a Freshman in College. Last year I worked on the Sanders Campaign. No, I did not for for Shrillary or Trump.

        2. The rich already have enough money to “spend on self.” The only thing they can spend it on is investment in other things. One can only have so many yachts ands many Rolls Royces and mansions before you have your fill of them. Rich people are not Scrooge McDuck, keeping their money in money vaults. it’s invested in businesses that create a return on that investment. It is better to invest her in the US where the investment will create jobs than create those jobs off shore in foreign countries.

  2. We do not need tax reform until we get a President and Congress not wholly owned by Wall Street.

    Clinton had a Bankster at Treasury. bush replaced him with another Bankster.
    Obama promised change and put a Goldman Bankster in at Treasury to replace Bush’s Goldman Banker. After leaving office he went to Cantor Fitzgerald and collected $400,000 to speak for an hour or so- what We the People pay a President for a year’s work.
    Trump promised to drain the swamp and has filled his staff with Goldman Bankster alumni and lobbyists galore.
    Hillary pretended to be a Progressive on the stump but behind closed doors at Goldman, Merrill and others praised Wall Street and told the Banksters she was on their side.

    Banksters have been lobbying heavily to kill Dodd-Frank and Ryan and Company have let Banksters write the bills.

    Do you notice a pattern?

  3. The effective tax rate US corporation pay is well below 20%. Corporations constantly whine about how high their taxes are and then you come to find out they paid 10% in taxes. LOL

    Typical corporate bullshit. Our problem is corporate subsidies, not high corporate taxes. The corporations do quite well, thank you.

    Everyone on the right cries about welfare cheats. Well, if you are looking for welfare cheats that really cost the American taxpayers huge amounts of money, just look at the large corporate fat cats.

    And while we are talking about welfare cheats, why not show us your tax returns Mr. President of the United States of America? Afraid we are going learn that you have been paying no Federal Income Tax for…how many years?!!

    Now, there is a welfare chiseler!

  4. Fact Sheet: Corporate Tax Rates

    Key Facts

    Corporate share of federal tax revenue has dropped by two-thirds in 60 years — from 32% in 1952 to 10% in 2013.

    General Electric, Boeing, Verizon and 23 other profitable Fortune 500 firms paid no federal income taxes from 2008 to 2012.

    288 big and profitable Fortune 500 corporations paid an average effective federal tax rate of just 19.4% from 2008 to 2012.

    Profitable corporations paid U.S. income taxes amounting to just 12.6% of worldwide income in 2010.

    U.S. corporations dodge $90 billion a year in income taxes by shifting profits to subsidiaries — often no more than post office boxes — in tax havens.

    U.S. corporations officially hold $2.1 trillion in profits offshore — much of it in tax havens — that have not yet been taxed here.

    Some corporations pay nothing in taxes

    General Electric, Boeing, Priceline.com, Verizon and 22 other profitable Fortune 500 firms paid no federal income taxes from 2008 through 2012, according to Citizens for Tax Justice.

    111 profitable Fortune 500 firms paid zero federal taxes in at least one of those five years.

    General Electric, one of the most notorious corporate tax dodgers, got $3.1 billion in refunds on $27.5 billion in profits from 2008 to 2012. The company paid less in federal income taxes in five years than a single American family pays in one year.

    https://americansfortaxfairness.org/tax-fairness-briefing-booklet/fact-sheet-corporate-tax-rates/

  5. And how many millions added to welfare the last 8 years?? You guys are pumping one half side of one half the truth and ignoring the rest. Quickest way to stimulate the economy and pay for health care is repatriation with stipulations that help the economy and infrastructure. Feel entitled about Wild Bill’s balancing the budget (along with Newt), but look at the debt in it’s present state. Dems have zero accountability.

    1. Well it would help the discussion if we started with facts.

      http://www.usgovernmentspending.com/downchart_gs.php?title=welfare_Spending_Chart&expand=40&chart=40-total

      You should notice that total welfare budgets dropped every year of the Obama administration. Which is predictable because unemployment dropped steadily every year of Obama’s tenure.

      Now you can tell us that your local area didn’t fare as well economically, and we can also discuss how different groups slant their reporting, sometimes bucketing Medicare in with healthcare, sometimes with welfare, sometimes double counting it. But you cannot rightly say Obama was irresponsible or unaccountable on this. He put up with congressional stonewalling and partisan attacks for 6 years. What did the Republican congress do for you in the last 6 years????

  6. Corporatist logic:
    The fewer the taxes the corporation withholds from the Fed. gov. to pay for domestic services – infrastructure for example – the more money the various levels of gov. will have for infrastructure repair.

    Likewise, the fewer taxes the gov. collects, the more money it will be able to dump into the Pentagon’s programs. Therefore, if the IRS were to be EOLd, leading to the Feds. not being able to collect any Fed. taxes, then the strength of the economy would reach astronomical levels leading to so much Fed. income as to be able to finance each and every gov. program everyone, from needy individuals and the wealthy corporation, demanded. The result would be an economic utopia.

  7. When the dumbass management team forgets its mission and has no product innovation to multiply the incoming cash flow, then they turn to financial games with Wall Street parasites to show profit. They ignore the mission statement on the company homepage and the corporate charter. They instead listen to greedhead scum on Wall Street who insist that games must be played to maintain stock price within ranges they prescribe, with regular pump and dump cycles to increase trading revenue.

    As a society, we have to decide: is the goal of a corporation to serve Wall Street, or are companies supposed to enhance the value of the lives of people?

    It is plainly clear that in the last generation, all value creation of everyone in the world has been skimmed off and hoarded by the likes of Apple and Wall Street insiders, overpaid executives and their cronies, while the middle class steadily loses its wealth and democratic voice.

    Then to top it all off, we have idiots in DC who think that building walls are going to stop the hard working immigrants who are willing to relocate themselves, work their butts off, and earn a solid living where the economic opportunities. We see far too many immobile-by-choice entitled American workers moping that they can’t work in the old coal mine like their granddaddies did, refusing to learn new skills to meet new opportunities. Let there be a free labor market. Walls solve nothing. If there needs to be a god damn wall, then use it to lock up the Wall Street thieves. I welcome the hardworking immigrants who made America what it is today.

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