“Companies that stockpiled trillions of dollars offshore free of U.S. income tax may get one last break before paying up — provided their fiscal years don’t follow the calendar year,” Lynnley Browning reports for Bloomberg. “A timing quirk in the tax overhaul that President Donald Trump signed last month may be good news for companies such as Apple Inc., Microsoft Corp. and Cisco Systems Inc., all of which began their fiscal years before Jan. 1. Firms including Alphabet Inc., Amgen Inc. and General Electric Co. — with fiscal years that began on Jan. 1 — appear to be shut out of the benefit.”
“Apple alone, which disclosed an offshore cash hoard of $252 billion as of Sept. 30, may be able to lop more than $4 billion off a future tax bill, according to Stephen Shay, a tax and business law professor at Harvard Law School who wrote about what he called the ‘potential loophole’ last month,” Browning reports. “In passing the most extensive tax-code revisions since 1986, Congress scrapped the previous international tax system for corporations — an unusual arrangement that allowed companies to defer U.S. income taxes on foreign earnings until they returned the income to the U.S. That “deferral” provision led companies to stockpile an estimated $3.1 trillion offshore. In switching to a new system that’s designed to focus on domestic economic activity, congressional tax writers also imposed a two-tiered levy on all that accumulated foreign income: Cash will be taxed at 15.5 percent, less liquid assets at 8 percent. Companies can pay over eight years.”
“The timing issue that Shay surfaced stems from a provision that, in effect, gives a company until the end of its fiscal year to measure what’s cash and what isn’t for tax purposes,” Browning reports. “Consequently, companies that began new fiscal years before Jan. 1 get an extra chance to reduce foreign cash they’ll accumulate this year — which they can do by distributing cash dividends to their U.S. parents before tallying up what’s left to be taxed, Shay wrote.”
Read more in the full article here.
MacDailyNews Take: More good news for Apple on the corporate tax front!
Don’t see how this is “good news” when the country is adding to a multi-trillion dollar debt for future generations. The flawed notion that economic benefit comes from giving the weathiest significant tax breaks (favorable tax llaws, stadium deals etc) has led to financial meltdowns, corruption and greater disparity between the wealthiest and lower classes. And yet here we are once again. Wouldn’t it be a much better idea to focus on upgrading the basic infrastructure of this country before addressing the impoverished plight of the weathy?
Public spending adds debt, not corporations. The question is how much of corporations earnings should the government be allowed to take. Two issues; two answers that must be addressed separately. Stop conflating the two. A State can net more tax revenue by providing a tax incentive to a corporation to set up shop in there state through increased revenue from employee state income taxes. These are often complex revenue projections and calculations. No government should increase public spending with the expectation that they can forever simply increase taxes to cover it. That’s why I’ve always said that we cannot “fix” the current tax codes. A different tax model needs to be put in place.
I agree with your well-written points, Spark.
I’d add that the enormous size of unfunded liabilities may one day cause the US to collapse.
While there are plenty of bad tax laws, some of which you highlight, the above topic is not one of them. US companies could keep their foreign-earned income overseas and use it, thus never owing taxes under the current system. Under the new system, that income will be taxed and paid, not deferred, and potentially never paid. How is that not “good news”?
The above loophole is supposedly just a quirk of the calendar, no different than Californian taxpayers rushing to their city office to pay next year’s prop taxes this year, so as to save a few bucks. Did you complain about those people?
Further, this is just a loophole that a professor believes exists, but we don’t know whether US Treasury or these companies believe it’s valid. I know when there’s a new tax idea, companies typically consult with US Treasury before implementing them. This is still at the idea stage, and we don’t know if it’s valid. The new law has a provision stating that actions to reduce tax will be invalid.
CB: Please un-link the notion that tax breaks are pushing/keeping down the poor. Money returned to those having paid-in is a return to the previous owner, NOT money taken from someone with no previous “ownership.” In addition, tending to infrastructure, albeit periodically necessary, does nothing to lessen the gap btwn rich/poor. As well, the “melt downs” you mention have more to do with spending than tax breaks. Yes, you give a tax break, it better be calculated that the break will bring enough growth revenue per current spending levels, or better in my mind, reign in spending at the same time. Govt. mistakenly doesn’t function this way…it’s appetite grows as IT grows. Btw, “stadium gifts” are silly and they are usually voted (locally) in by the numb-sculls that think how cool it would be to have “that team” I’m my city. The perception causes a vote that’s blind to the true costs.
Lastly, giving the “wealthiest significant tax breaks’ makes it sound like the govt is being deviously preferential to this class. How so…they are being returned, or reduced the amount that THEY paid in, or are due. They are also the sector that has $$ to invest/risk, which in-turn assists the “lower classes, with employment. Never forget that the wealthy are already pay a pretty fair share…”1 percent of Americans will pay nearly half of the federal income taxes,” (fairly recent #)
That’s improper, or would a greater tax penalty be better/more just? I have a feeling you think that money paid in, by the wealthy should find its way to those that had nothing to do with the creation of money/jobs? If so, please be able to see that position akin to Marxism.
“giving the weathiest significant tax breaks”
1) over 50% of all working Americans own shares which will be positively affected by the new rules.
If you have mutual funds, a retirement plan like corporate 401 (which are usually baskets of shares or commercial bonds etc), or a government pension etc. you own corporate shares. (note: the government invests in corporate shares bought by taxpayers to fund pensions)
2) 70% of Apple is own by funds, the rest by individual investors.
If you have one of items in (1) like a ‘dividend’ fund in your 401 you probably own aapl (it is one of the most widely bought stocks as the company is so big).
3) for a person without a guaranteed pension like government workers (who as i pointed out also have shares indirectly in their government pensions) you need to invest in a 401 or similar for retirement. If you retire at 70 and live to 90 you and have a 50k a year lifestyle you need ONE MILLION dollars for retirement, a heck a lot more if you have medical needs etc. Unless you own a business in which case you are like Apple the average joe better have stock investments, trying to save pennies in a checking account to accumulate for retirement is futile.
Of course the person can also decide to just feed off the welfare tit.
mostly shareholders are not ultra wealthy but just trying to save for old age.
(it’s weird that small shareholders who invest in shares for retirement and NOT burden the taxpayer are considered ‘greedy evil people’ while irresponsible people who don’t want to invest or save and want to feed of the taxpayers via welfare are considered ‘good’ ).
3) the USA has one of the highest corporate tax rates in the world before the new rules. that’s why USA companies like Burger King have left the country and set up HQ elsewhere for lower taxes. Burger King set up in ‘socialist’ (universal health care) Canada! which had LOWER corp. taxes ! With the new rules USA will have lower taxes and stop factories , businesses from moving . Apple makes TWO THIRDS of it’s income from OVERSEAS sales but it has kept its HQ in USA.
4) without the change in the new reparation laws corporations would simply keep their overseas earnings overseas and pay zero.
5) some other countries react way faster than USA changing laws to promote businesses. ONE WEEK after the new USA laws were signed China said that it would charge ZERO tax on Chinese sales of foreign companies if companies invested the earnings in China (instead of bringing it back to the USA etc). In the USA that kind of change would have taken probably years, maybe decades of argument instead of a week!
the topic is too large but if you study it unlike what most people perceive the USA environment for entrepreneurship is not super healthy. Communist China has more business startups and have one third of the worlds startups starting with a billion dollars or more.
the Atlantic:
“The Organization for Economic Cooperation and Development, an international research outfit that specializes in side-by-side comparisons between different economies, calls this percentage the “employer enterprise birth rate.” Others just call it the start-up rate. But whatever you name the measure, the United States scores fairly low on it. We’re second to last, for instance, on the OECD graph (of 25 countries) ”
6) SHAREHOLDERS buy shares usually with their after tax salaries (unless it’s in a 401 or similar, where they have to pay tax later when they take it out).
Corporations pay tax. Then after paying tax if they have profits left over they pay dividends.
shareholders when they get these dividends will have to pay INCOME TAX on them.
then when they SELL the shares if there is gain, they will pay CAPITAL GAINS TAX.
(btw: from what ever they get they will then use those dividends to pay off their property tax, carbon tax on fuel, tolls on highways and bridges, environmental surcharges, hotel tax if they go on vacation, etc etc. In my area I pay RAINFALL tax based on the sq foot of my roof for ‘water sewer upgrades’ in spite of the fact I live two blocks from the ocean and rain just goes there … People are being taxed to death. )
7) All monies in a country in the end mostly come from people doing business, even the government survives on this. Kill businesses and you kill the country.
EVEN with the high rate of taxes, the ultra rich are still getting richer because every time there’s politicians who bow down to higher taxes cries, the burden falls most often on the MIDDLE WORKING CLASS instead of the ultra rich. For example rising sales tax and carbon taxes. Do you think a billionaire cares if his pays carbon tax and sales tax on the gas for his Lamborghini ? (but it will affect the working class who needs to drive to work ).
personally I think if you want better for the middle class, cut taxes and make it up by CUTTING WASTEFUL GOVERNMENT SPENDING. there’s a bridge in my area which was supposed to cost less than 50m and now unfinished it’s already 110m plus and every town, state has the similar issues.
Are all these tax breaks really helping Apple’s overall value? People keep talking about all these billions of dollars coming to Apple and the stock is still performing as sluggishly as it has been before the tax windfall. Maybe the news media making too big of a deal out of Apple’s repatriated cash and tax loopholes. Exactly what date is Apple supposed to get all of this repatriated cash? I’m curious to see what it’s going to do to the stock.
For all the talk about Apple repatriating hundreds of billions of dollars in cash, the news media seems to be far more interested in Throttlegate lawsuits.
Gee, where to start.
Unlike Laffer’s theory that wealth trickles downhill, ergo, we must tax the wealthy less so that more is available to trickle down, what is being made very clear is that he was wrong, incredibly wrong.
Since Reagan’s tax overhaul the top 4%’s wealth has grown dramatically, while the middle class (dependent on those trickle down dollars) has been shrinking.
Before Reagan’s tax “reform” a dollar cycled through the economy 4 times. So a $100 “stimulus” increased economic activity by $400.
Today a $100 “stimulus” only cycles 2.5 times, generating $250 of increased economic activity.
Why? Money/wealth does not trickle down, it flows uphill. If left uncontrolled all wealth would accumulate to the top 4%. Of course that is very unlikely because revolution occurs before that happens.
Even though Trump’s tax “reform” reduces taxes on the middle class and lower wage earners, it also reduces taxes on the class above “middle” class. The modest cut from 39.6% on the wealthiest to 36% increases the retention of wealth at the top end.
Retention is a key point. Retention takes money out of circulation, reducing economic activity. Without governmental subsidies enjoyed by the bottom of the economic ladder, economic activity would decline – significantly.
Another problem is the way the US taxes. The US taxes production via an income tax. Congress, in its constant desire to cater to the most voters (non-millionaires), devised several tax free and tax deferred retirement instruments. On the surface these look pretty good, in reality they are ineffectual for the very people that need them the most – the lower wage earners.
Why?
That’s simple. Someone making upwards of $50K per year doesn’t have the cash flow liquidity required to set aside monies for 40+ years. They have financial emergencies wherein they need access to those set aside monies, BUT, if they do they are penalized for withdrawing monies from these tax deferred accounts prematurely.
Contrary to popular belief the lower income earners understand this (even if unknowingly) and DO NOT open retirement savings accounts.
As income goes up the wage earner has a greater ability to set aside monies into long term retirement accounts. Those at the top have the greatest ability to save and invest. It’s a snow ball effect in action.
But as the wealthy save and invest they are removing monies from the economic cycle. Remember, that cycle has decreased from 4X in the ’80s to today’s 2.5X.
Granting any kind of tax cut to those making over $250,000 per year reduces long term economic activity as more money is removed from economic activity.
Read Warren Buffet’s comments on the detrimental effects of wealth accruing at the top.
This situation exists because the wealthy can, and do, contribute far more than the middle class can to the election/re-election of the people that write tax law: our Congressmen and Senators. This is not a Party issue, as tax law requires support from both Parties and the President to pass.
For the record I am 71 and have been a fiscal conservative Republican all my life, although my loyalties to the Republican Party has waned over the last 25 years as I’ve come to recognize Republicans as equally responsible for the mess our tax code (including Trump’s “reform”) is in.
Walmart’s recent pledge to increase min wage and bonuses to some isn’t considered, trickle down? If not TD, this is what?
they’re paying for it by closing a bunch of Sam’s Clubs. sucks to be those (ex) employees!
https://www.usatoday.com/story/money/2018/01/11/sams-club-closing-dozens-stores-reports-say/1024986001/
It is noble of Walmart to give a token increase in minimum pay scales, well timed to curry favor with the GOP, decades after they slaughtered the economies of towns across America by corporate welfare. Walmart has always paid poor wages, offers mostly part time positions, no/slim healthcare benefits, and highly variable (unstable) working hours. They have also been convicted of misogynist pay & promotion.
Meanwhile the Walton kids play with their many billions.
Get back to us when Walmart pays a living wage with benefits.
It’s not meant to be a living wage. When I was paid min wage, I lived with my parents. You are obviously one that believes your employer is there to support you. If you don’t like a/your company, you have the option to move on, or to not seek their employment. Your post symbolize a costly mindset we have across the country.
As long as the Walton kids continue to play and invest and spend and not hoard… that money will trickle down..it wont evaporate !
At the end its regular people who make Lambos and Ferraris , Mansions and alike . The wealthy may be enjoying the products and sevices.. but these products and services are made/provided by regular people whos living depends on the whealty spending….
“But as the wealthy save and invest they are removing monies from the economic cycle.”
Not unless they save by hoarding under their mattress ….
Saving and investing keeps the money in the circulation.
unless it’s buried in the backyard, or stored under the mattress. The statement implies an illogic…that the wealthy just “sit” on their $$. How did they become wealthy…not by “sitting” on it. They are at least banking it in a savings/money market acct. In that case other investors/risk takers are getting loans to start a biz/make an investment. In both cases money is active…some more, some less. Money does not sleep. I don’t know what “financial cycle” you refer to, but am interested in learning more. Also, why doesn’t WB claim that he’s a contradiction to the theory he claims about the accrual at the top?
who could have possibly foresaw that K Street lobbyists rewriting the tax code on a cocktail napkin at 2 a.m. would result in billions of lost revenue to unexpected loopholes? but i’m sure it’s just this one!
Before with 35% corporate tax Apple kept 250 billion in profits offshore and paid no tax on it. If apple brings home 200 billion and pays 15% tax the US govt collects 30 billion in taxes. So 0$ versus 30 billion $. Sounds like a better deal for americans in general.
“Trump broke me and made me his little bitch!” – Karl Marx