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Comment by vellum | Hacker News Reader

According to this Bloomberg article, companies have $2.1 trillion sitting offshore for tax reasons [1]. They're probably waiting for Congress to let them bring home the cash, tax-free. However, the last time that happened (2004), it was done to encourage companies to create jobs. Instead, they spent it buying company stock. [2]

1 - http://www.bloomberg.com/news/articles/2015-03-04/u-s-compan...

2 - http://www.theguardian.com/money/us-money-blog/2015/jun/13/r...

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It may be sitting offshore for tax reasons, but even if it were sitting here (with higher taxes), it'd be sitting. Parked. Hoarded. Illiquid. Whatever you want to call it. Tax rates are the proximate cause here; what we really need to look at is the cost of capital, and why companies deem there to be no productive investment use for that excess cash.

As far as I know the US taxes the income of its citizens even when they live outside the US. So why can't the US just tax the offshore income of the companies?

"So why can't the US just tax the offshore income of the companies?"

There's 2.1 trillion reasons....

Because the US needs the businesses, not the other way around.

That's quite funny.

If the US blocked a company from it's market, that company would collapse practically overnight.

The US is the most profitable market in the world with the EU running not too far behind.

Think about Alibaba--it's profit is about connecting Chinese sellers to the profitable markets in the US and EU--not about connecting to other Chinese suppliers.

But the US can't just block offshore companies from its market without absolutely destroying its economy.

What do you think would happen if the US suddenly decided that no company can do business in the US without paying taxes to the US for their offshore profits?

They'll pay the taxes. Also grumble for a month maybe, then go quiet.

I don't think you realise just how much money that'd be.

You only have to injunct one. After a couple million in losses, they'll pay up. At that point, the threat of injunction would simply get the other ones to pay.

Or, you start seizing domestic property to pay taxes on the foreign assets.

Do NOT assume the government is ever powerless. It is always bigger than you.

The government might not be powerless, but exercising such power would be disastrous.

Also,

>After a couple million in losses

Leads me to believe you don't really understand the numbers we're talking about here. That's missing at least a couple of zeros.

Not at all. Shareholders would begin screaming at the management to pay the taxes almost immediately.

Losses wouldn't even make it to $100 million before management was replaced.

How on earth does replacing the management affect US tax code?

Nope. Lobbying dollars.

Not really, creating a hostile environment for businesses will obviously drive them away.

Lobbying has nothing to do with preventing a completely unrealistic scenario from happening.

Are you serious? Where could Apple establish itself if not for the US? Or Google? Or Facebook?

The government comes first, as a guarantor of civilization. Everything else comes later.

There's this whole continent of pretty civilised countries just to the east of US.

And in those countries too, businesses need the government.

And?

I think you're missing the point here, US double taxing foreign income would put everyone else at an insane competitive advantage.

Really? Other countries don't have taxes?

I'm not sure you follow, we're discussing double taxing here.

They would have to change the tax code.

It depends; if you are paying taxes to the government of the country you reside in (say, Australia), the US has a reciprocal agreement with them, and you are not charged tax two different times on your income.

On a company level, this seems to translate into "we have super low local tax rates, build companies and campuses here to boost our local economy!" (see: Ireland).

to a point, then double taxation kicks in (on income)

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