The current U.S. tax code could be raised 15 percent under the Trump administration's goal to reduce foreign profits.
(TNS) -- For Apple and other Silicon Valley tech companies, tax cuts proposed by President Donald Trump and the Republicans could be huge.
The framework that will act as a jumping-off point for Congress to revamp the U.S. tax code includes a proposal to cut corporate taxes to 20 percent from the current 35 percent, and language about making changes to “[stop] corporations from shipping jobs and capital overseas” and reducing taxes on foreign profits.
Apple alone holds $231 billion overseas, or 94 percent of the $246 billion cash hoard the company had as of the end of 2016, according to a Moody’s annual investor report, released in July.
Other tech giants with lots of money stashed overseas include Microsoft, which according to the Moody’s report had 95 percent of its $131.2 billion cash hoard abroad at the end of 2016; Alphabet (60 percent of $86.3 billion); Cisco (87 percent of $71.8 billion); and Oracle (88 percent of $52.8 billion).
As they sought to avoid repatriation taxes, the total amount of cash held overseas by U.S. companies climbed to $1.3 trillion at the end of 2016, up from $1.2 trillion in 2015, Moody’s said.
During his presidential campaign last year, Trump promised a one-time repatriation rate of 10 percent, but that figure wasn’t included in the nine-page proposal his administration released Wednesday.
The proposal says: “The framework transforms our existing ‘offshoring’ model to an American model.” It says it will do that by “taxing at a reduced rate and on a global basis the foreign profits of U.S. multinational corporations.”
Apple CEO Tim Cook made quite a statement of his own last year about his company’s cash hoard. He said during an interview with RTE radio in Ireland that the company had “provisioned several billion” for the purpose of repatriating profit to the United States this year.
Apple would not comment on Cook’s remarks at the time — his interview came after the company was ordered to pay back taxes to Ireland. The company is appealing that European Commission decision.
Apple has long advocated for lower taxes on profit made outside its home country, especially because its size and success make it a popular target for critics of American companies that keep most of their money overseas. In 2013, Cook and other Apple executives were called to testify before Congress about the company’s tax avoidance. Cook said, “Apple pays all the taxes we owe,” and called for tax reform.
What would that tax reform bring, though?
In 2004, after a tax holiday under President George W. Bush, U.S. companies that repatriated overseas profit did not produce the national economic benefits as expected. A report by the Congressional Research Service, Congress’ nonpartisan think tank, said the hundreds of companies that took advantage of the drastic tax cut — 5.25 percent — used the money they brought back to enrich shareholders: They didn’t create jobs. They cut them.
“Of course the aim of companies is to benefit the shareholder,” said Fred Foldvery, a lecturer in economics at San Jose State University, in a phone interview Wednesday. But he said the permanent tax reductions being proposed are “a step in the right direction” that could provide long-term benefits to the U.S. economy.
Overall, Foldvery said more details are needed about the tax plan, which he said is “probably not revenue-neutral” and would increase the deficit.
©2017 the San Jose Mercury News (San Jose, Calif.) Distributed by Tribune Content Agency, LLC.