How much would Apple’s overseas cash help the U.S. economy?
How much would Apple’s overseas cash help the U.S. economy?
Apple CEO Tim Cook says the company pays all the taxes it legally owes. Tuesday, he was on Capitol Hill to face questions on some $100 billion that Apple holds overseas, safe from American tax collectors.
Apple, of course, is hardly the only American firm that moves money around the globe to lower its tax bills. And there are surely Washington bureaucrats who would love to get their hands on a potential new source of revenue. But getting that money into America and onto the tax rolls would solve some problems and create new ones. The issue of corporate taxation underscores just how difficult it is to change the tax system.
It helps to first get a sense of just how much U.S. corporate money is overseas.
“The scale is gigantic,” says Ed Kleinbard, former chief of staff of Congress’s Joint Committee on Taxation and now a USC law professor. “That number is about $2 trillion right now.”
Tax that at the top corporate rate and suddenly America has an extra $700 billion. That’s as much as the financial crisis bailout in 2008. In reality, hardly any companies actually pay the full 35 percent tax rate. Our hefty tax code is filled with loopholes that companies fight hard to keep. But the tax revenues on this foreign money could still be hundreds of billions of dollars, which would be some shopping spree.
“It would have a tremendous impact on improving the federal budget, reducing the deficit and of course it’s money we could be investing in our future,” says David Cay Johnston, a Syracuse University law professor and columnist for Tax Analysts.
America’s armchair budgeters could take their pick and spend the haul on education, health, or the military. Or new corporate tax revenue could be used to cut taxes for actual humans.
Whether by funding programs or cutting their taxes, most Americans would probably choose to help people over companies. But it’s not quite that simple, because people’s income and savings are connected with companies, whether they know it or not.
In today’s hearing, Republican Senator Rand Paul said companies like Apple are being wrongly vilified for following the law. Then he started talking about the man in the mirror.
“Is there a Mr. Apple out there? No, it’s us,” Senator Paul said. “If you have a mutual fund, you probably own some Apple shares. If you’re a teacher with a pension fund, you own Apple shares. If you’re a fireman with a pension fund, you probably own Apple.”
Boost a company’s tax bill and the hit to the stock price can hurt ordinary people’s retirement savings. Or it might jeopardize the jobs of people who work for and with the company. Changing any tax law squeezes somebody. That’s why simplifying taxation is so hard, and why Apple and other companies have such big lobbying bills.
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