Apple's cash hoard swells to $246B
cnbc.com
cnbc.com
They don't manufacture anything in the us -- do they need those kinds of billions to hire more software developers in Cupertino -- that seems pretty unlikely to me. Do they need it to build more US apple stores (nope they've got that covered).
They are already paying a dividend with free cash flow from their US business ...
I can't imagine why they would ever want to "increase investment" in the us vs the many far more productive things they could conceivably do by spending that money outside the us ...
http://www.businessinsider.com/warren-buffett-on-dividends-2...
There have certainly been times where Buffett has struggled to find good investments, and in the short run a dividend might have seemed wise. But those times always pass and letting cash pile up until opportunities arise has worked very well for him.
Apple isn't an investment company. They are a consumer products company. Their new product ideas should not require large amounts of capital. Even the silly car idea should never get more than $10B or so in funding until it's proven, which is mice nuts in their grand scheme.
So they should return excess capital to shareholders. The only limiting test is how much is 'excess'. Tim Cook is likely being very conservative, but in the future if Apple has to ride out some bad years, having a hundred billion or so in the bank might prove the difference between success and failure.
https://www.forbes.com/sites/baldwin/2012/03/19/steve-jobs-w...
Our dollar being too high in value is an advantage to wealthy and buying more abroad but harms workers here competitively no matter what they do. It also makes companies with money in other areas able to do more outside of the US, good but also bad.
Another thing that would help immensely is companies no longer being allowed to provide benefits, a legacy bug, just salary, enough to get their own services as those are private and companies should not be involved in that. Healthcare would need to be either single payer or private but solely individual and not tied to your employer which is a single point of failure, it may also fix medical pricing one day if more consumer focused.
Both lower taxes and companies not having to worry about providing benefits/healthcare would be immense competitive moves. Companies in Canada, UK, Mexico etc etc don't have to worry about providing healthcare benefits and it makes it easier to start a business, change jobs and in general allows more focus on business and products.
No, this isn't workable.
Don't say something can't be done when it can easily be done. We'll embargo your goods at container ports and land borders if necessary. If you're a digital company, we will drop your ASN traffic at the border.
Donald Trump becoming president is fairly indicative that nothing is off the table.
Now which one do you want to pay all their taxes on all their international income? IBM? SAP? Pick carefully: why should SAP have a competitive advantage over IBM?
Digital companies ALREADY pay taxes for everything that happens INSIDE of the USA. What we are arguing about is stuff that occurs OUTSIDE of the USA.
Donald Trump becoming president simply means crazy idiotic proposals are now on the table. But then again he is realizing "gosh, this is really hard, not as easy as I thought" like health care, wall building, labelling china a currency manipulator, tax reform, etc...
I'm actually pretty fond of some of his proposals, such as deporting illegal immigrants who have committed crimes and making it much more difficult to hire H1Bs (I don't like many other policies he's put forth, but you can't get everything you want); but then, that's what happens when both parties ignore a large chunk of America. Public policy starts coming down the pipe that gets called "crazy idiotic", and then its policy.
American citizens are taxed on all worldwide income, why is it crazy that businesses should be as well? If you pay taxes to some other country, sure, you get a deduction for that. But tax accounting fuckery where you're paying no taxes on a large amount of income? Nope.
I say corporations won the war, they have the legal teams to keep winning. As a response let small/medium sized businesses compete better by just lowing business taxes to really low levels, or progressive taxing as you grow. Right now the high tax rate only really affects our engine small/medium businesses who provide 50% of GDP, 65+% of jobs and 33% of exports.
The only companies paying taxes are small/medium businesses, the tax system here almost is a competitive advantage to large companies over small/medium. If larger companies aren't going to invest here, get competitive help to the small/medium companies and entrepreneurs that are to challenge them.
Personal income tax dodging is bad as that is where most tax revenue comes from. Taxes should probably be lower on income as well though to discourage tax games and retaining more tax whales (wealthy tax payers). People of all brackets need more money in their pocket for this consumer economy that hasn't really rebounded.
https://www.bloomberg.com/news/articles/2017-04-11/sorry-ame...
How low is low enough? Pay your damn taxes.
There are lots of taxes beyond income tax. Basically taxes take about .35-.50 out of every dollar earned through income, sales, other taxes. Business expenses for businesses, kids, credits and other things can help bring it down as well as standard deductions but it is still high.
They also don't include self-employment tax (15%) and sales tax (6-10%). Sales tax and self-employment alone are over 20% close to 25% not counted in the article. Property tax can be close to 1% (depends on property), dividend taxes also aren't included (10-15%).
Please let me move all my retirement savings into foreign stocks before you pass this law, please.
Imagine it is 2007 and you can choose to invest in Apple and receive 60% of profits, or Samsung and receive 100% of profits. What's the better investment?
Imagine it is 2007 and you can choose to invest in Yahoo and receive 60% of profits, or Samsung and receive 100% of profits. What's the better investment?
For now at least, it does seem to have an advantage and draws capital. (For example, Samsung has a huge R&D center in silicon valley.) Of course for every successful IPO in the valley, there are many others who don't make it near that far.
The original poster was saying "...We just change the tax law to tax that money whether they bring it back to the US or not.". This would mean for example, that when selling in China, Apple would have to pay Chinese AND US/CA taxes on the profits made there and Samsung wouldn't - this would put US corporations at a huge disadvantage to their competitors. While I can see the goal is to get more tax money from corporations, it is obvious to see there would be a number of unintended consequences.
What you are forgetting is that US law doesn't discriminate against foreign owned companies. (Which is good - it encourages investment in the US.) So if a corp with US headquarters would pay 30-40% taxes on profits made in non-US countries, this would make those companies very uncompetitive against a foreign company.
>...they will continue to find startups in California because it still offers the best return on investment.
If something like this was done, there may still be lots of money invested in CA, but eventually it would be mostly companies with a HQ outside of the US.
The bulk of Apple's profit has come from design, marketing and engineering by employees, plus outstanding judgment and leadership by Steve Jobs. Those things were done in California. The problem is that Apple uses accounting tricks to transfer the profit to Nevada or Ireland or some other low-tax jurisdiction.
It doesn't matter where the company's headquarters are located. If Samsung has profitable operations in California it should be taxed on that activity at the same rate as any other Californian business. That leads to another point - there are plenty of Californian businesses which cannot use the same accounting tricks that Apple uses. So you have a situation where two businesses that draw from the same pool of resources pay different tax rates. It could be that Business A uses those resources more efficiently but Business B gets funding because its tax rate is lower. That strikes me as inefficient.
Running a business in California is like growing crops in a particularly fertile field. You get a great yield, but you should also pay high rent.
In regards to Apple, Tim Cook in his testimony to congress said:
>...The Company’s FY2012 total US federal cash effective tax rate was approximately 30.5%.1
>…Apple does not use tax gimmicks. Apple does not move its intellectual property into offshore tax havens and use it to sell products back into the US in order to avoid US tax; it does not use revolving loans from foreign subsidiaries to fund its domestic operations; it does not hold money on a Caribbean island; and it does not have a bank account in the Cayman Islands. Apple has substantial foreign cash because it sells the majority of its products outside the US. International operations accounted for 61% of Apple’s revenue last year and two-thirds of its revenue last quarter. These foreign earnings are taxed in the jurisdiction where they are earned (“foreign, post-tax income”).
https://www.apple.com/pr/pdf/Apple_Testimony_to_PSI.pdf
>...It doesn't matter where the company's headquarters are located.
If you are a US company, it does.
>...If Samsung has profitable operations in California it should be taxed on that activity at the same rate as any other Californian business.
It is. The difference is that Samsung subsidiaries that make a profit in Germany don't have to South Korea corporate tax when they want to invest in South Korea. In fact, the US is the ONLY country (other than Eritrea) that does this - every other country has figured out that this discourages bringing investment capital back to the home country. The guy who posted the original snarky post about just taxing all the worldwide income of a US corp didn't try to defend it when people posted some of the more obvious consequences. US companies need a level playing field against the companies from other countries
>...That leads to another point - there are plenty of Californian businesses which cannot use the same accounting tricks that Apple uses.
I think you are referring to how some of the big corps essentially pay no US corporate tax. A number of economists have said a much better system would be a revenue neutral system where you remove the corporate tax and increase taxes on capital gains and dividends as that is much easier to tax and corporate taxes tend to hurt the workers in a company and hurt the consumer by increasing prices. But that is a different issue.
>...Running a business in California is like growing crops in a particularly fertile field. You get a great yield, but you should also pay high rent.
CA has unique strengths and weaknesses for a business. There are smart people all over the world so there is no absolute guarantee that CA will do as well 40 years from now as it has done over the 40 years, but that again is a different issue and worthy of its own discussion.
There is more than one company called Apple. Which one do you mean?
I think only Eritrea and the US taxes corporations when brining back money into the country. For obvious reasons other countries realized this was not a good approach and don't do that.
Tax policy is typically used in the opposite way, if the dollar drops and the US government wants to shore it up, it will alter tax policy to encourage repatriation. The Bush administration did it in the early 2000's if I recall correctly to help strengthen the dollar.
If more money/investment is back in the US then it may actually help wage stagnation and get people raises. It will at least happen in the small/medium business arena which would also love to have healthcare removed from employment.
To help small/medium business, lower taxes and remove benefits from employment. They will have more to pay employees.
More capital is always better. It lowers the bar for investment. It increases productivity, allowing us to get more of the best jobs. The strong dollar is a sign of success.
And don't forget that reprinted profits aren't always revinested, lots of it is paid out to shareholders who consume some of them, creating demand.
I think one of the unintended effects of the loose monetary policy at home and abroad is the extreme rise in home prices in all major cities. I think most of this was not intended by the policy makers. But investor dollars follow safety and returns - real estate has been an amazing investment since 2008 (look at major cities like Toronto, Vancouver, SF, etc.). We're talking about doubling you capital in less than 10 years. This is not stopping ... I don't think it will until rates go much higher.
one option is to tax the money regardless of accounting technicalities that assign revenue to international subsidiaries. then it doesn't matter where the money resides accounting-wise, since there would be no special treatment of overseas cash.
another tax-advantaged option that's entirely within apple's control is to distribute more of its income to its employees (especially retail employees who generate above average returns on investment for the retail industry), who in turn would spend the money rather than hoarding it, thereby increasing overall economic velocity (particularly in the lower tiers of the economy).
we should hold the IRS (and government economic policy overall) to the singular task of making sure tax law is applied evenly and fairly across all economic strata, so that we all have an even playing field. we should not tolerate corporate welfare in any form. corporations are not babies.
You mean "shareholders's income". It's not Apples income to run social programs with.
Lowering (or preferably eliminating) corporate income taxes benefits investment at every level, from Apple all the way down to startups. If your business plan shows that if you hit plan you will generate $1M in profit your first year, and will reinvest $600k in the business, the rest going to CA and US taxes. Now contrast that to the reinvesting the full $1M in the business. In the second case the business will be able to grow faster and increase company asset/equity value faster, of course it will be more valuable. And this means it's more likely to get funded.
I know you didn't say this exactly, but it is not true that a company exists solely for looking after shareholder's income. They also have other things to look after, such as social obligations.
Here is an article with some more detail about it (PDF): https://centres.insead.edu/social-innovation/who-we-are/docu...
Tim Cook is worth around a billion dollars, he has massive personal resources to pursue charitable activities on his own. Should he reduce the dividend an aging widow depends on to use corporate resources instead?
apple's situation itself disproves your central tenet that lower corporate taxes equates to value generation. apple is fully taking advantage of lower corporate taxes, yet it's unable to invest its massive hoard of cash fast enough to generate any additional value. that money is literally wasted by sitting in apple's bank account.
if more of that cash had been distributed to employees, some of it would have gone to buying more consumer products, like iphones (economic velocity), and some of the more enterprising employees would have decided to start a new venture (value creation).
Shareholders own the company, all its assets and all its profits. Without their willingness to allow their investment, assets and profits to be kept in the company, it doesn't exist. Suppliers and employees are only part of the equation because they are paid to be, and if they don't like their pay will walk at the drop of a hat.
If your business becomes unprofitable your shares can be rendered worthless, and you can't "quit" and exchange worthless shares for ownership in a better company.
My own take is that paying staff more than necessary can be counterproductive because it can lead them to retire early or feel wealthy enough to leave for less stressful or more enjoyable jobs, thus disadvantaging the company.
So wait, how do you handle the Chinese who want to tax Apple as well? And would Apple be at a disadvantage to non-American companies like Lenovo or SAP, so we would have to tax all companies in the world on all business they do anywhere if they have a business presence in the USA. Otherwise, all companies would simply stop being American because they would be severely disadvantaged otherwise.
Not workable.
The regressive nature could be removed by an income based rebate or UBI.
Other than the options you have suggested to deal with the regressive nature of consumption tax (which seem sensible to me), I thought the Republican tax proposal is essentially to: lower tax on returns to capital (by reducing the corporate tax rate) and institute a value-add consumption tax (in the form of a cash-flow tax).
This is a different thing from taxing global profits, which is uniquely American (well, and Eritrea). VAT is something else.
Like Universal Basic Income or Mincome, this sounds great and even conservative intellectuals like the concept (Milton Friendman was a major proponent of mincome).
In practice - the problem is this gets framed as "sending YOUR TAX DOLLARS to LAZY POORS". So we're likely to end up with the regressive consumption tax and no rebates or UBI, whether that's day-1 or a decade or two down the road.
In practice I've also noticed that many EU retailers will attempt to charge VAT even on export goods (which should not be taxed), and I'm sure they're reporting them as exported and just pocketing the extra 20% tax.
EU retailers should not be charging VAT on orders they deliver overseas.
Then, as now, there was a lot of envy/dislike of wealthy people. That doesn't support the idea in this thread that wealthy people are bad for the economy.
Sure they invest, but that also tends to hurt the economy by driving up relistate prices etc without actually increasing output. They also tend to do vanity investing which is why VC firms for example average such terrible returns.
There's no evidence of that. The canonical robber baron, Rockefeller, steadily drove down kerosene prices by 70%. They did not go back up. See "Titan" by Chernow.
> wealthy people tend to spend money on less economically scalable things.
This makes no sense to me.
> hurt the economy by driving up relistate prices etc without actually increasing output.
This is claiming that rich people spend more money than non-rich for the same item. There is no "rich premium" paid for things. Even so, the person who gets paid that money then goes and spends it - it doesn't disappear from the economy.
> They also tend to do vanity investing which is why VC firms for example average such terrible returns.
You're asserting that wealthy people are terrible at managing their money. It's like saying an Olympic athlete doesn't know how to train effectively.
Would you prefer to take financial advice from a rich person or a poor person?
You can't automate million dollar paintings. If you sell 300,000$ watches the cost is part of the appeal, it's just conscious consumption.
Supply demand curve, if someone wants to buy land as an investment there is no new land created which increases prices somewhere. See any city with significant vancant housing stock from foreign investors.
JK Rowling did not become wealthy by being a wise investor. The Walton family includes someone who diversified and guess what they have less money than the others, demonstrating incompetence. I could go on but having lots of money and being a competent investor are very different things.
Or maybe, the assertion is that wealthy people are good at managing money in ways that benefit their entrenched holdings, but not good at finding the Next Big Thing. Or in ways that simply improve the economy overall.
Your entire argument can be countered simply by the example of the Ford Motor Company and its decision to pay workers more than the bare minimum so that they could actually afford to purchase the vehicles they were making. This lead to huge gains over other boutique automobile manufacturers at the time which produced vehicles that cost several times that of the Model T. And improved the economy of the area immensely.
In general, extreme concentration of wealth is bad for the economy because it does not allow enough people to make decisions that cause growth overall and improve the wealth of the nation. The most obvious historical example is that of the high middle ages where all of the land, currency, military power, etc. was in the hands of the few and 90% or more of the population was at a subsistence level. The wealth of the nation was not spent on improving the lives or economy of the people, but on defending the holdings of the rich from other wealthy people.
In contrast, the renaissance started when that wealth was distributed among merchants, craftsmen, and bankers who were able to invest their income and gains back into technology that improved productivity for everyone (but most especially for themselves) and resulted in an overall wealthier nation.
https://www.google.com/#q=concentration+of+wealth+effect+on+...
It's your right to believe whatever you want, but that's what this world-view is, belief, and nothing based on evidence or reality.
Just track GDP in (1776 vs 1913 / population in 1776 vs 1913 ) / (1913 - 1776). Well don't do exactly that you need to use logarithms because exponential growth. You end up with significantly less than 2% annual growth.
Not really. Nearly everything a farm family needed was produced on that farm at the time. Note that Jefferson made his own nails on his plantation. People were short, malnourished, and bone evidence of having worked incredibly hard. There was no farm mechanization.
A consistent food surplus was not produced until around 1800.
PS: Rememebr prior to the revolution the US was sending a great deal of wealth back to England. The even then the colonies enjoyed a relatively high standard of living at the time.
(There's always been some level of trade.)
PS: Yes, subsistence farmers can include minimal trade, but not support more than local governments as that would imply a significant surplus.
The roaring economy of the 50s was the result of massive government intervention during World War II - literal central planning in many cases - as well as numerous social and public-work programmes (GI Bill, National Interstate Highway construction, etc) funded by intense taxation on upper brackets (95% tax rate).
That's a huge oversimplification. It helped that Europe and Asia were devastated by the war, and our gearing up industry for war led to huge dividends for us because we still had factories and raw materials which remained intact.
And evidence on the new deal is equivocal [0]. It didn't seem to have much impact until the war.
1. A person struggling to make ends meet ends up with an extra $200 a month.
2. A person who makes enough to meet all of their needs and many of their wants ends up with $200 extra a month.
Which one is more likely to spend that $200?
I'm not rich but I am in group #2. If I got an extra $200 a month it would probably go into savings or debt payoff. That's good for me, but it doesn't help the economy.
People with 2 million in bank are not going to spend that. It's sitting there. After a point there's on so many investments that can be made.
contrast that with people who need cash to buy things right now.
The second stimulates the creation of work.
No, it's not. The bank loans it out. There's a reason the banks offer free checking - it's not because they're in the charity business, but because they loan out the deposits and make money off of that.
There's more to it, and you can go deeper, but for the context of a simplified comparison, loans and investment were excluded.
The full explanation is that investment focused money has to be supported by consumption. You cant keep investing without people consuming stuff. Otherwise there's really no economy.
So consumption in the middle of the pyramid and bottom of the pyramid, generally has more impact on the economy:
2 million distributed between a bunch of people who will spend all of it immediately in purchases (toilet paper, food, clothes) has an immediate and direct impact on the economy.
Vs.
2 million to 1 person, who spends only 50k on daily expense, buys 1 car, and invests the rest, (there's only so many houses/cars and big ticket purchases people are going to make with their money. You don't need 7 dryers for example.)
That's the reason. Investments aren't going into the economy directly. They need someone else to be creating demand, thus creating investment need.
Nobody gets a loan or sells their company in order to store the cash in their mattress. Nobody hoards cash. Nobody with any fiscal sensibility, that is.
Money in a mattress is not working, and wealthy people especially always put the money to work (otherwise they become not-wealthy). Putting the money to work means it gets spent.
If risk is ignored and the money is thrown down a pit through ineffectual business, it's pushing on a string, velocity-wise. The company added the same kind of temporary stimulus you'd get by hiring people to dig ditches or do a cash transfer, but in a less efficient way than either one of those. Sometimes you get a hit, but dealing with direct investments is high overhead and introduces more conflicts of interest.
Capital that prefers lower-risk bets, on the other hand, ends up pooling in financial instruments designed for a low nominal risk: indexes, bonds, treasuries, real estate, and more sophisticated cocktails like the repackaged subprime mortgages that contributed to the 2008 crisis. These tools act indirectly on businesses, and so the money only gets "spent" in the sense that someone in finance is getting paid to handle the trades, somewhere along the way. Hence you get the effect of "velocity at the top", because money is sloshing around in a musical chairs game disconnected from goods and services, going from one large institutional investor to another. Each trade raises the pressure to speculate, allowing the market to trend upwards without actually doing much of anything for consumers, gradually increasing the likelihood of a crash.
And that is why Apple can end up sitting on $246B at the same time that the economy runs at less than full employment. Their strategy is already executing at full funding. They're financed for anything they could ask for, so if they're not doing it, they didn't want to do it. So they have to make a decision as an investor instead, and one of those options is to sit out if they perceive the market to be too risky.
Hoarding cash has a negative ROI (inflation). They are still going to put it to work. Apple is not sitting on $246B in idle cash.
> Each trade raises the pressure to speculate, allowing the market to trend upwards without actually doing much of anything for consumers, gradually increasing the likelihood of a crash.
There's no evidence of that.
So its normal for funds to return their capital back to investors as they say "hey, we really cant find more targets".
You seem adamant on assuming that investment = money at work.
This is like saying that pressing on the pedal = accelarate, while magicking away all the work done by the engine, and various other moving parts. The transmission mechanism.
Investment, is not consumption.
It is investment, in order to take advantage of consumption.
Directly providing consumption, is a far better method of improving economic activity, than by investment, in the current market scenario.
Oh wait - maybe I have a bead on where you are coming from:
In the scenario where all infrastructure and all factories were working at max capacity, any further investment in Infra/capex, will lead to an improvement in demand.
In the current scenario though, that is not the case, and adding more factories will not result in an increase in economic output.
Simply put, building a factory, but having no customers is investment with 0 return.
That's one way to look at it. But obviously at an extreme it doesn't work. The best way to increase monentary velocity and consumption is hyperinflation, but nobody is advocating that.
If consumption were truly driving the economy, Venezuela and Zimbabewe would be monentary powerhouses.
http://positivemoney.org/how-money-works/advanced/how-money-...
Banks don't have a shortage of money if less people save. In theory yes, but in practice, banks can borrow money at basically a 0% interest rate from the government. If the government sees that there isn't enough money in circulation, they will just put more in circulation.
[1] https://taxfoundation.org/us-corporate-tax-revenue-low-becau...
(And yes, individuals might want to work for dollars. But the American domestic economy as a whole only needs to accepts dollars in order to make other people accept them in return for their useful goods and services.)
Also, a strong dollar is useful for all consumers---not just rich people.. (The limits to dollar strength are not in export, but in making monetary policy too tight for the domestic economy.)
Many advocate a "Destination Based Cash Flow Tax"[1], which is a Border Adjustment Tax - i.e. the tax applies on the destination of the product rather than the source.
1. https://en.wikipedia.org/wiki/Destination-based_cash_flow_ta...
The answer is simple. Eliminate the corporate income tax, and increase personal dividend tax rates to ordinary income rates.
Then any profits that are reinvested are not taxed, increasing investment, productivity and wages. Any paid out to shareholders for consumption are taxed at the exact same rates any other income gets taxed on, making our personal tax system more fair and progressive.
For those of us (like me) who only really understand taxes in the context of individual earnings and income tax (and the ever annoying property taxes), can you explain why?
It's a sneaky form of tariffs. Tariffs are a terrible idea. Free trade benefits all parties.
Currently there is a large amount of corporate expenses around conforming to and gaming the corporate income tax code. Eliminating the corporate income tax is a massive simplification that not only makes investment more attractive, but it eliminates those costs that produce nothing, and the spending redistributed to actual productive activities that produce goods and services. Finally, eliminate corporate taxes benefits importers and exporters equally, it's not industrial planning to pick or favor winners and industries, it relies on market forces not political ones.
We've opened up free trade, and gotten rid of many hodge-podge, patchy tariffs, but we haven't replaced the wealth/income redistribution with anything else. The tax system is now less progressive than it was.
Every tariff removed should have had the government income it represented replaced with an increase in some other broad-based tax to compensate. Otherwise you're not just making the system less patchy, you're actually just taxing less, and lower taxes generally means worse income and wealth inequality.
So tariffs are a terrible idea, but I think no tariffs at all can be worse. I'd rather have a patchy inconsistent push against rising wealth inequality than none at all.
Get out of here with your genius ideas.
The problem is due to our 2 party divide and conquer system, sane policy like this will probably never happen as it is one for each side, the warring teams of the political sports leagues, red v blue.
If we actually had a system that was based on compromise not dividing, bribery and wealth then this would probably be a good deal.
Please see your sibling comment, authored by me - this already exists and is in wide usage ... almost every (small) business you have ever dealt with works just like that.
The first part "Eliminate the corporate income tax" is lessened by pass-through.
Pass-through taxation exists in LLC/S-Corp/sole-proprietorship which does remove corporate tax and increases the personal income tax level. This is definitely in effect but there are still 9% of tax revenues from corporate C-Corp taxes which some small/medium businesses may be but mostly large corps. So truly corporate income tax still exists and tax games will be played.
The second part "increase personal dividend tax rates to ordinary income rates" is definitely not in effect. Dividend tax rates are 10-15% depending on income and hold time short vs long. The idea is that if companies aren't paying taxes and give that in dividends, revenue is collected more at the non-value creation end just investment end. Which is good and bad but great for cashflow of US companies to not have to pay taxes, lots of that could later be re-couped at dividend payouts.
I agree that it's overcomplicated. Equally I'd argue eliminating corporate tax isn't the right mechanism either, as foreign shareholders could evade US taxes entirely. Which to an extent is an encouragement for investment, but equally it evades the infrastructure the US provides to businesses.
Right now we have the reverse of this - effectively double taxation on dividends for US shareholders (corporate tax and income tax). Dividend imputation is my preferred solution - However, I am biased seeing this in effect in Australia as franking credits.
The Chinese investor isn't a US citizen, doesn't get to vote, or benefit from government programs, isn't using US infrastructure, essentially is a cost-free source of capital. Why would we want them to invest in another country instead?
Even if the business doesn't benefit directly from that infrastructure, they benefit from being present in an economy that supports that infrastructure.
The US is a great place to invest because of that environment, seems reasonable that it has some level of cost.
If this is the true (that high income earners pay very little personal income tax), what you're suggesting would remove all tax on foreign capital and shift nearly the entire Federal tax burden on to middle and low income earners. And I thought the Republican proposal was to halve corporate tax rates and make up the revenue by taxing domestic consumption (in the form of a CFT).
From http://www.politifact.com/truth-o-meter/article/2011/sep/21/...
* Buffett said that his taxes amounted to "only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent."
This is already the case for many, many businesses.
"S Corps" (and other passthrough entities) are widely, widely in use and behave just as you suggested - the business pays no taxes, the monies flow to the owners, and the owners pay personal taxes on those flows.
It's very simple and it works very well.
It is not a fringe practice or a weird setup - almost every business you transact with is set up as a passthrough entity.
There is a catch...
A passthrough entity needs to pass all that cash through, more or less, inside of that tax year. You can't just sit on funds or store them up in your bank accounts or save for future R&D, etc. - you need to pass it all through this year.
And so if you are a mega-corp, that is a problem since there are many, many reasons you might want to store funds across several years ... and that is the class (C-Corp) that gets taxed.
So what you suggest is here, now. We, as a society, have decided that there is something negative about corporations slowly building up cash troves year after year without taxation and so we don't allow that. But I see they are doing that anyway, offshore, so perhaps it's time to rethink that...
Citation needed. S-Corps are almost exclusively small and medium businesses.
Eliminating corporate taxes for every U.S. company in the entire country just because a few very large companies have a ton of offshore cash doesn't make sense. And your assumption that it will be made up by increasing dividends seems misguided since the people that decide whether the company pays a dividend are the largest shareholders who want to minimize their own tax burden as much as possible. They'll simply figure out a different way to pay out those gains that don't involve a dividend (more buybacks, mergers/acquisitions, etc.).
I agree that it would be good to figure out a way to bring some of that cash back to the U.S. even at a lower rate, but this is definitely requires a scalpel and not a hatchet to fix.
Actually they are selling bonds to fund this as well as share buybacks.[1] So yeah, they would like to repatriate at some point, but there's no rush.
[1]"The Cupertino, California-based company has been tapping credit markets... to reward shareholders instead of repatriating that overseas cash because it would be taxed by the U.S." https://www.bloomberg.com/news/articles/2016-07-28/apple-sai...
It's always a gamble trying to create certain incentives, but could the gov't give a tax holiday assuming the repatriated cash is invested within the US?
It's an interesting idea, but I'm not holding my breath as usually the implementation is difficult and what ends up happening is companies game the system and get the cash back in the US without having to do anything.
Seems like Apple is better off with the tax status quo - it provides a good excuse to combat the short term investor demands for return of the cash pile and allows the accrual of what could prove to be a very serious long term advantage ...
I wonder how often the mere (ominous/encouraging) existence of the cash pile proves useful during supply chain development/negotiations ...
If there was something productive they could do with that money, they would have done it already. The money is currently just sitting in a "bank" somewhere, collecting extremely low interest rates. The money would be far more productive if Apple simply returned it back to its shareholders, who can then invest it in other ventures of their choosing [1].
The only rational reason for Apple to hoard the cash, is in anticipation of a tax holiday. And given the nature of the Trump administration, I wouldn't be surprised at all if Apple manages to buy one.
If they did do something with the money, i wonder if automation is at the stage where they could invest in local supply chains and bring iphone manufacturing to the US. Chinese labour is not as cheap as it used to be, all the parts are still in china for now though.
They're obligated to obey the wishes of the shareholders, who are the owners of the company. If the shareholders want it, the shareholders get it. (That's assuming the shareholders haven't been suckered into buying shares without voting rights, etc.)
Dividends are post-tax and have to be brought back to the US before they are paid out. Apple has a whole bunch of money sitting overseas that it has not paid taxes on. So, if Apple brings it back to pay to shareholders as a dividend, 40% goes to the US government and 60% to shareholders.
Let's say Trump tells Apple (and other companies) they can bring the money back with a 10% tax. Now, the shareholders get 90% of the money as a dividend, which is 1.5X the 60%.
In order to pay dividends and not pay taxes, Apple has actually gone the route of borrowing money. So, they borrow money in the US and pay a low interest rate while their cash sits overseas.
Wow really. That's clever but also weird. Don't they sustain themselves US being largest market?
To clarify: they haven't paid US taxes on it. They've paid whatever taxes are levied by the foreign countries they're operating in, but the US also double-taxes that same money if it's brought back into the US.
Did you read the post?
That's not true. It's not all cash and most likely is mostly not cash. They report it as being cash and cash equivalents.
http://www.zerohedge.com/news/2015-07-23/worlds-biggest-hedg...
As an aside, they are not mainly paying dividends to get this money to stock holders. Pushed heavily by large Apple owners like Icahn, apple is buying back it's own stock - effectively paying dividends by raising the stock price. I don't recall the exact details why, but somehow that ends up also being more tax efficient. Eg: https://www.google.com/amp/s/www.forbes.com/sites/antoinegar...
Source: https://www.amazon.com/dp/B014BR46P2/ref=dp-kindle-redirect?...
Dividends are taxed in the year of payment, so investors lose some of that gain within a year.
On the flip side, buy-backs can be a poor way to spend cash, as companies might buy back at high stock prices. So the third way to reward the stockholder is to just keep that cash stashed in a bank account -- you get neither taxed (dividends) nor do you buy back potentially inflated shares. However, you have the cash stashed away to do either if you ever need to, or find a good opportunity to (e.g., stock price slump.)
Sure, there are fewer shares - but the value of the company has gone down (it has less free cash, i.e. fewer assets) and the two effects should exactly offset each other.
This McKinsey article is old but explores the topic in some detail.
http://www.mckinsey.com/business-functions/strategy-and-corp...
--
"Sending signals
The market responds to announcements of buybacks because they offer new information, often called a signal, about a company’s future and hence its share price.
One well-known positive signal in a buyback is that management seems to believe that the stock is undervalued. Executives can enhance this effect by personally purchasing significant numbers of shares, since market participants see them as de facto insiders with privileged information about future earnings and growth prospects. A second positive signal is management’s confidence that the company doesn’t need the cash to cover future commitments such as interest payments and capital expenditures.
But there is a third, negative, signal with a buyback: that the management team sees few investment opportunities ahead, suggesting to investors that they could do better by putting their money elsewhere. Some managers are reluctant to launch buyback programs for this reason, but the capital market’s mostly positive reaction to such announcements indicates that this signal isn’t an issue in most cases. In fact, the strength of the market’s reaction implies that shareholders often realize that a company has more cash than it can invest long before its management does.
Therefore, the overall positive response to a buyback may well result from investors being relieved that managers aren’t going to spend a company’s cash on inadvisable mergers and acquisitions or on projects with a negative net present value. In many cases, a company seems to be undervalued just before it announces a buyback, reflecting an uncertainty among investors about what management will do with excess funds.
Such shareholder skepticism would be well founded. In many industries, management teams have historically allocated cash reserves poorly. The oil industry since 1964 is one example (Exhibit 4): a huge price umbrella for much of this period, courtesy of the Organization of Petroleum Exporting Countries (OPEC), provided oil companies with relatively high margins. Nevertheless, for almost three decades the spread between ROIC and cost of capital for the industry as a whole was negative. Convinced that on a sustained basis the petroleum industry could not deliver a balanced source of income, many companies committed their excess cash to what turned out to be value-destroying acquisitions or other diversification strategies. For example, in the 1970s, Mobil bought retailer Montgomery Ward; Atlantic Richfield purchased Anaconda, a metal and mining company; and Exxon bought a majority stake in Vydec, a company specializing in office automation. All of these cash (or mostly cash) acquisitions resulted in significant losses."
If Icahn started selling shares to someone else, the price would fall. If he sells to Apple itself, much less likely that the price would fall.
An example would be a stock you value at $10 per share. It has $5 per share of excess cash, but you attribute $3 of value to the cash. This is because you discount 20% for dividend taxes were it to be paid out, and a further 20% for risk it may never be dividended or that it might be invested poorly.
So if the company pays out the actual $5, netting you $4, the remaining shares should still be worth $7 in your valuation estimate, meaning $1 in value is created.
This is of course pedantic, because it can be argued that there should be no risk discount for cash, and if there is certainly not 20%. My argument would be I'd value $1 of cash in Buffett's hands as worth more than $1, and in the hands of many public CEOs hands at less than $1. There is too much self-dealing by public management, and they usually possess little investment expertise outside their own business.
Does Apple have any car development expertise or unique IP? I'd say the risk of them blowing $40B in that market is significant.
So I'd argue that a small risk discount exists in most cases and is recaptured upon dividend.
Simple example:
company A has 100 shares outstanding and only 1 asset: $100
The value of each share is $1.
It then decides a share buy-back is a good strategy, and buys back 50 shares for $50.
It now has 50 shares outstanding and $50 of assets.
The value of each share is still $1.
The buy-back has no effect on share price.
In any case -- to answer your question -- in your example, it would not have any effect on share price as it seems the company is just a holding company for $100. However, in the case of Apple they have other assets besides the cash (brand, intellectual property) and those assets produce more cash -- so all the cash the other assets generate in the future gets distributed to a smaller number of shareholders.
But you answered as a fact that a share buyback increases share price, and sorry but I don't agree with that point - as demonstrated, for an asset holding company it is not the case.
And for a company with cash generation capabilities there is still a subtle point about whether the company can create more value with the cash than the shareholders; if the company can create more value than shareholders, then removing cash from the company via a share buyback should reduce share price. If it cannot, then removing cash from the company should increase the share price.
Since Apple is simply hoarding the cash, we've already ruled this out -- Apple themselves admits they do not have any way to deploy the cash that would produce more returns than just stashing it in a 0.07% interest bearing account. The question then just comes down to how they disburse the cash (keep vs buyback vs dividends)
In my view you really should qualify your earlier statement that "Buy-backs are more tax efficient because they increase stock price" as it is really not a generally true statement. If it was, I would be in the business of buying companies, then making them use any free cash to buy back some shares from me (my remaining shares then somehow go up in value), then selling the remainder back to the market. Free money, it would be great!
The 80s were well known for corporate mavens buying undervalued companies, splitting them up, and selling the assets individually. The practice resulted in a net profit.
But that's bit different from saying that a stock buyback will always increase share price.
Assuming that there's no tax holiday, the above is a losing strategy over the long term. The ROI that Apple is getting on its cash hoard, which is mostly getting invested in treasuries and other ultra-safe investments, is lower than the interest rate that Apple is paying on its debt. Which means that by borrowing money at 3.5% interest and investing it at a lower ROI, Apple is bleeding money every single year.
Yes, they avoid having to pay taxes for now, but they are just pushing this off to a later date. If they adopt a strategy of keeping the money offshore forever, their interest debt will keep ballooning, and the amount of money they lose on interest debt over the long-term will overshadow any one-time tax payments.
Apple's strategy only makes sense if they are anticipating a tax holiday in the short/medium term, at which point they can repatriate all their money at a lower tax rate. I hope to hell they don't get it, because if they do, every single company is going to start doing the exact same thing. It will become yet another gigantic tax loophole, and a drag on the economy to boot.
Let's assume Apple earns 2.5% on its Ireland cash, but is paying 4% to borrow against it. On US profits it has to pay almost 41% in taxes, on its Irish interest income it's laying almost zero. It's debt interest is tax deductible and hence costs less than 2.4%, making this example profitable. And nothing stops Apple from buying short term investments that yield close to its boeriwng costs.
But even if it's close to break even it's a no brainer. Once you repatriate profits you can never undo the tax consequences for those profits. And events other than tax holidays can happen that may cause you to regret not waiting.
For example, if Apple decides to do a large international acquisition/investment (Porsche?), and pay $50B in cash as part of it. They would have had to repatriate over $80B to have $50B after tax. Or they could do the acquisition from Ireland for only $50B.
Why do companies not disburse excess profits like this to those that were responsible for creating the value in the first place?
So distributing it to employees, while noble and just (imo) would require shareholders to vote against their own immediate interests.
In practice, there's probably some friction, but you can damn well believe with numbers this large Tim Cook would be sued in a heartbeat if he attempted to implement such a scheme.
The primary market for shares absolutely benefits companies by giving them large amounts of cash now, in return for a claim on future earnings. This can allow a company to create more value than it otherwise would be able to do.
The secondary market is mainly a benefit to shareholders, not companies; but without a liquid secondary market, there would be fewer people willing to invest in the primary market.
Jobs + Woz created the Apple II, investors funded inventories, production, marketing, and everything else.
It's their business and presumably want a return on their money.
So this essentially means that building anything outside the US (factories, research, whatever) comes at a 30%~ discount, since doing the same thing in the US would result in a tax payment.
So tax loopholes like this, Double Dutch, etc, are explicitly putting a premium on further production/investment in the US (and other areas whose taxes are being avoided).
That there exists a certain political lean in the US that explicitly is against fixing these tax loopholes is absurd to me.
Some people's veneration for corporations seems based more on religious than economic thinking.
The whole reason why companies keep money overseas is because they are waiting for a tax amnesty deal.
But if they knew that no tax deal was EVER coming, then they'd be more willing to bring it back over.
But right now we have high corporate rates. We double-tax the profits with an average rate of around 50% when paid out as dividends (whether you are in the lowest or highest bracket, little difference). We single-tax reinvestment of the profits at around 40% with state income taxes included.
What about on the capital gains that results if the money is used on stock buybacks instead?
If the corporate rate goes to 0%, capital gains and dividends should be taxed as ordinary income, and the top income tax brackets should be pushed up to their historic 1950's levels, and the profits going out to foreign investors needs to be taxed somehow. Trickle down clearly doesn't work, and we need to start fixing this situation.
Asking a genuine question is not reason for downvote.
Rather than letting obviously wrong statements stand unchallenged people just downvote them. There is no obligation to explain.
Why can't you stop spreading falsehoods?
Either way - you asked why you were downvoted, and now you have an answer.
Got it thanks.
There you go. So even your claim that I'm making things up is false.
Intellectual honesty is a currency around here.
It's expected if a repatriation bill passes, Apple will pay out a special one time dividend to shareholders, and some think it will be as big as $100B.
Jesse Drucker wrote a lot about such tax maneuvers during his years at Bloomberg News. An overall link to his work is here: https://www.bloomberg.com/authors/APuiS-bL1Fc/jesse-drucker
What actually happens is Apple sells product to international subsidiaries to sell in their countries. In some cases international subsidiaries build products and sell them to Apple US and other subsidiaries.
The profits from international sales and production are profits in the subsidiaries that sold or made them. They aren't taxable in the US until those subsidiaries pay dividends to their owner, Apple US. Given that the US and California corporate income tax rates combine to equal 40%+, Apple US chooses not to take dividends from the subsidiaries at this time, and allows the profits to accumulate in savings accounts overseas.*
*this is a simplification of course, but basically accurate. One thing Apple does is funnel lots of the subsidiary profits to Apple Ireland, because Ireland's tax rates for the bank account interest is extremely low. But it all works out the same as Apple Ireland is a subsidiary of Apple US, and Apple US can't touch those profits without losing over 40% of them to US/CA taxes.
They just have hired a bunch of lawyers to tell them how to do it so that it is legal.
By the way, when you talk about selling product to international subsidiaries you are actually talking about putting their IP ownership in international subsidiaries and then having the American subsidiary pay licensing fees so that no profit is made in the US.
"can already make a wide range of investments on a tax-free basis, but cannot purchase their own corporate stock or invest in their own businesses, such as by building a new plant. Foreign earnings used for those purposes would instead be treated as repatriated and subject to normal corporate tax rates."
Apple can take the accumulated profits it stores in Apple Ireland that is currently invested in Irish/european banks, and invest it in US banks. And it probably does.
But it can't pay dividends with that money to shareholders, or it will be hit with 40%+ income tax rates (CA+US) on it.
And it can't invest it directly in Apple US to build a campus or R&D center, or factory, without paying 40%+ income tax rates.
Don't confuse the taxes levied on a US citizen's income when living abroad with Apple's situation.
Apple is a US corporation.
One commenter appears to have assumed the former, the person replying assumes the latter.
http://www.afr.com/business/accounting/irs-chases-us-citizen...
I know someone who is giving up US citizenship on return to Australia for this reason.
Which is exactly what I meant, you are paying the membership fees whether you use the services or not. The US govt knows that, if you dont like you are free to give up that passport which I am sure you wont.
It's not that simple.
The US govt knows that most non resident US citizens even if they dont like paying taxes are still going to pay it because those citizens still want to be part of club US.
Not that I think it's a good idea to get rid of borders today, just that a natural extrapolation of western morality, which favors choice over birth, leads you down a path to a borderless world.
IIRC, the US considers corporations as people. Am I wrong?
If I am taxed by the US for every single penny I earn regardless of source, why should not US Corporation LLC Inc? We are both people. We both have income. Perhaps we both have foreign bank accounts. Every inch of my income gets taxed but US Corporation LLC Inc gets to stash big monies with no regard? I am confused.
If the US corporation directly accumulates income overseas, then it would be liable for US income tax as well.
It's a lot easier for a large corporation to arrange its affairs in this manner than a natural person, though.
You actually have it better than the corporation!
But the overseas profits were earned outside of the US by non-US corporations, so why should they be taxed in the US? If I buy shares in Samsung, it doesn't suddenly have to pay 35% of its Korean income as taxes to the US.
Dutch citizen working and living in the US does not file taxes in The Netherlands. US citizen living and working in The Netherlands does file taxes in the US.
Imagine Samsung builds phones in China. It's chinese subsidiary has to pay Chinese taxes on the profits from selling those phones. But it doesn't have to pay income taxes to the US on them.
Now Apple builds phones in China. It's Chinese subsidiary has to pay China income taxes on the profits from selling those phones. Now it also has to pay and additional 40%+ income tax combined to the US & the state of California, all because the subsidiary is owned by Apple USA?
Samsung would say, thank you US tax code! Our high end Galaxy phones can now sell for substantially less than iPhones and we'll get even more market share!
The way things are today is and enough. Apple still owes that 40% whenever the subsidiary pays those profits back to Apple US. Hopefully they'll pass a repatriation bill so the federal rate will drop to 12% or so (20%ish with CA state income tax), and Apple will bring the profits back.
You should really think about whether corporations should pay any income taxes at all. Profits are either reinvested in growing the business (and creating jobs), or paid to shareholders, who already have to pay taxes on them. Double taxing profits before they can be paid to shareholders, or single taxing them before they can be reinvested, is a significant disincentive to investing in the US. It's trapped trillions in US capital overseas.
But my point is rather than trap US capital in overseas bank accounts earning limited interest, it's far better to have it brought back to the US and invested directly in businesses (or returned to shareholders).
And we shouldn't have any of it.
If you think 50% is a reasonable tax on investment, then fine. But don't pretend it doesn't exist.
Only few politicians were against really knowing how the law will play. While those who push the law wanted all the countries involved to simply report on USC, the report itself is very complicated and confusing. Result? Majority countries that signed up for FATCA simply stopped opening USC account and shut down all accounts that belong to us citizens.
Two of my friends shut down their legitimate companies in Hong Kong overnight because they didn't have bank account anymore. Another friend started working with HK citizen so that he will represent him on paper and got screwed up out of his business. Result -- discrimination against USC around the word in terms of banking and less competition around the world from us-people.
When I worked for US corporates I had to get a US ITIN, and then fill in some paperwork annually and/or at the start of each job. The paperwork (W8BEN, I think) told Accounting not to collect tax in the US, because the earnings would taxed in the UK under a reciprocal treaty.
The US is one of the very few countries to demand that US citizens pay tax to the US gov on all their earnings, and then pay tax again to whichever country they're resident in.
This tragic/hilarious asymmetry between ordinary citizens and corporations says a lot about the balance of power in the US.
The old loop hole used to be that if you were (Or intended to be) non-resident for 2 years or more you didn't owe taxes to Canada (you would need to do a deemed disposition of all your assets for tax purposes though). But then you couldn't vote either...
And keep in mind that the vast majority of countries have tax treaties with the US such that you'll get tax credits for foreign taxes paid. You'd only pay taxes in both countries if you're living somewhere with lower taxes than the US.
I dont think either the individual nor corporation should be taxed on overseas income but if you disagree that's fine, but at least put forward a non crabs in a bucket style argument.
Given every citizen $1k like in the futurama episode. Or use it to fund meals on wheels for a century.
They don't? That's news to me. How do you invest in a U.S. company without bringing the money into the U.S.?
Apple spends hundreds of millions of dollars designing the iPhone 7 in Cupertino, and then billions marketing it.
It makes it in China, spending tens of billion to make it for an average unit cost of $300.
It has subsidiaries in many foreign countries that sell it for an average of $600.
Where should the profits be calculated? Should all net profits accrue to Cupertino, so that no foreign subsidiary makes any money? That doesn't make sense at all and no US tax authority has ever tried to make Apple account for profits that way.
And think about what happens under a system where foreign subsidiaries have to be rolled into the US tax calculations. Apple has to pay 40%+ of that net margin to the US and CA in income taxes. So their effective unit cost of the iPhone 7 is now $420. It now only has $180 in net margin to pay for world wide sales, marketing and R&D, so they have to be tempted to raise their prices substantially.
But Samsung gets to make a very similar phone using very similar parts for $300. They don't have to deal with world wide tax systems, so if they price their phones at $600 their Korean taxes will only be on a fraction of the $300. They can even cut prices if they don't need margins as high as Apple.
This is the perfect tax system if your goal is to sell more Samsung phones and fewer iPhones. I'm sure it would be great for the US economy.
Apple says Apple Ireland has no income since all of its profits go towards paying licensing fees to Apple US. So it's income for Apple US, but they haven't paid the tax on it?
Right now that money seems to be in limbo with no one having paid any tax on it. If Apple wants to recognize that as US income, surely they should be paying the tax on it. But let's not create some tax holiday so large companies can pay zero tax on foreign activities.
The myth of Apple's low tax rate goes something like this. Let's say Apple makes $10B in profits. $5B are profits of Apple US, and $5B are profits of it's international subsidiaries. Apple pays about $450M in state income taxes on the $5B and about $1.6B in federal income taxes on the remainder (35% of the $5B minus state taxes).
It also pays income taxes in every country it has a subsidiary in on the foreign $5B (let's estimate income taxes average out to 20%, or $1B), and ships the remaining $4B to Ireland for storage until such time as US tax rates aren't so onerous.
Now someone looks at Apples financials and sees it paid "only" $1.6B in federal income taxes, even though it made $10B! OMG, they shout, Apple is only paying 16%, no one is paying 35%, our tax system is a LIE!
But in this example, Apple paid over $3B in total income taxes, or 30%. And if it repatriates the $4B, it will pay another $1.6B in state and federal income taxes for a total tax rate nearing 50%.
And this doesn't count all the other taxes Apple pays, from property taxes, sales taxes, VAT, import tariffs, etc, around the globe.
The "double dutch" strategy revolved around how much value you assigned to your IP and moving that IP to tax favorable countries. It's no longer legal or used. What costs and profits Apple assigns to subsidiaries is subject to judgement and audit. But mostly it's just a smokescreen to ignore how terrible our corporate income tax system is and it's rates are among the highest in the world.
Apple pays a ton of taxes. We'd be better off not taxing corporate income, so one can argue it pays too much.
https://www.sec.gov/Archives/edgar/data/320193/0001193125153...
Apple, which has some 6,000 workers in Ireland, says its Irish units paid the parent company a licensing fee to use the intellectual property in its products. The Irish companies didn't own the IP, so they don’t owe tax on it in Ireland, Apple says, but the units will face a U.S. tax bill when they repatriate the profits. Apple expects to pay about 26 percent of its earnings in tax for the most recent fiscal year and has set aside some $32 billion to cover taxes it says it will face should overseas income be returned to the U.S.
That day will never come.
I think it makes sense to look at outcomes. It's a fun intellectual exercise to look at the thousands of pages of tax guidance from many tax advisors on lots of different structures within a complex tax system, and analyse the tax rates, which include some high top-end marginal rates.
But at the end of the day, tax revenues as a percentage of GDP in the US are 26%. That's well below the EU (world's largest economy, biggest block of developed countries) of 35%, and well below the OECD (world's largest economies) of 34%.
It's kind of a myth that the US has some of the world's highest taxes. Perhaps it has some high tax rates, but after all the exemptions and deductions etc, the result is a relatively low tax burden, about 1/3rd lower than the average of other developed countries.
As a green card holder, I too am expected for the lifetime of the green card to pay US taxes, even if I were to move back to my home country and never set foot in the US. This is unheard of anywhere else.
If people are paying $1 for hamburgers today, and the owner gets a tax cut, will hamburgers be sold for less? Doubtful.
[1] Mirrlees et al, Tax by Design (2011), p 438, citing Hassett and Mathur (2006) and Arulampalam, Devereux, and Maffini (2007). You can get a PDF at http://www.ifs.org.uk/publications/5353.
All of that said, I strongly agree with your first point. People pay corporate taxes through: 1) higher prices for products and services, 2) less employment, 3) lower returns on investments (a lot of people have 401Ks). Corporate taxes just obscure a person's tax burden.
Apple hasn't paid a cent of tax on that $246 billion, for one.
"How Apple paid just 0.005% tax on its global profits"
http://money.cnn.com/2016/08/30/technology/apple-tax-ruling-...
> The "double dutch" strategy revolved around how much value you assigned to your IP and moving that IP to tax favorable countries. It's no longer legal or used.
It is still legal and used.
Fact: most of Apple's global income taxes, are domestic. Apple's paperwork shows immense domestic profit.
Of Apple's $15.64 billion in income taxes for fiscal 2016, $8.64 billion of that was domestic, with a further $4.9 billion domestic deferred. Foreign income taxes out of the $15.64b, was a mere $2.11 billion.
(A) "if".
(B) Not even necessarily; [0]
Apple paid a 25.4% tax rate on their income last year.
That's a relatively high effective tax rate compared to the effective tax rates in nearly all developed nations.
2) Most large corporations pay a substantial corporate tax rate. Exxon and Chevron for decades have routinely paid over 35%. Walmart pays a 30% rate. Facebook has averaged a 32% tax rate the last five years. Boeing has averaged a 25% rate the last five years. Intel routinely pays 20% or higher. Pfizer has averaged a 22% rate the last five years. 3M has averaged a 28.6% rate the last five years.
Would you like me to continue listing the tax rates of major US corporations? Because the overwhelming majority of them pay a high rate compared to the rest of the world.
So much for your theories.
The top 20.5% of returns (incomes over $100k), paid $1.27 trillion in federal income taxes out of the $1.35 trillion total for all returns. That group paid a total of $2.15 trillion in federal taxes. That's out of about $3.2 trillion in total federal tax receipts for that year. So the top 20% of tax payers, are providing around 67% of all federal taxes.
Now by comparison:
The $40k to $50k income bracket, has 14 million returns and $640 billion in income. On that income, they paid $4 billion in federal income taxes, or a 0.7% average federal income tax rate. That group paid a total combined (all federal taxes) of $75 billion, or a 11.7% average rate for all federal taxes paid by that group (eg including things like Social Security).
The $50k to $75k income bracket, has 25.5 million tax filers, with a combined income of $1.56 trillion. On that $1.56 trillion, they paid ... $59 billion in federal income taxes, or a 3.8% average federal income tax rate.
Need I say more?
I was questioning the value of analyzing it in terms of "income taxes".
The bottom 80% of tax returns have $5 trillion in income, and are paying $65 billion in federal income taxes.
Read that a few times over.
The $500k to $1 million income bracket, has 13% as much income as that bottom 80% group, but pays about ~120% more in income taxes. Personally, I think that's fine, I'm all for a progressive taxation system, especially in a country as rich as the US. However, throughout any thread on taxes, as with this one, you'll see a lot of posts claiming the rich pay little in the way of taxes, when in fact it's the exact opposite. It's not even up for debate, it's a fact easily proven. Should the rich pay even more? That's the debate.
The 80% you break out there is contributing a lot more than $65 billion to Social Security and Medicare.
I mean, those programs are explicitly designed to not be progressive, that's why there is a cap on income considered for social security (Medicare became progressive under the ACA, a little bit).
Sorry, power users are very small # of users. Making a laptop to appease power users will do very little to the bottom line.
The majority of professional devs use apple laptops because they are a great selection of tools and nice ui with unix tools. They can't build off that?
And somehow they only sold $6B in Apple Watches it's first year, not only making it the most successful watch launch in history but the best selling watch in the world by revenues.
Imagine if they'd only invest more!
Q1/17: 80M iphones, 10M+ ipads, 5M Macs. And margins on phones and pads are higher than on PCs too.
But again, Apple's Mac sales are over $25B a year,and it's profit margins on those sales are far higher (15% vs. 2-3%) than the other PC makers. It will never be as big as iPhone or iPad, but it's still one of the largest businesses in the entire world (it would just miss the Fortune 100 list on its own). It's sad they aren't doing a better job of updating the hardware, but so far it hasn't shown up in their sales.
No they're not; they're the most profitable mobile phone manufacturer who also happens to make PC's.
I do all my development in a Linux VM, and it's definitely a wide decision, seeing how many hours my colleagues waste setting up Postgres or Docker or even just Golang on their Macs. (Before you ask, I cannot boot into Linux directly because company policy.)
Even so, a Mac is closer to Linux than windows is, it's a full unix under the hood after all.
Having the same environment on my workstation as on my servers always appealed to me (since my SGI days, when I would develop stuff on an indy and deploy on a challenge, basically a headless indy).
But I can't imagine using OS/X as a server environment and windows seems just wrong as a server.
So that leaves me with Linux, but I don't mind and I like the whole concept of open-source software.
Well, that's the issue. If you're used to a certain way things work, one week is not enough time to get used to another workflow. Even when you switch from google docs to microsoft office, or vice versa, you'll be very frustrated and confused for a lot longer than a week.
I have the same exact reaction to you when using windows. When I try to use a program on my high res display I can barely read the text, when I zoom in and increase the text size the entire program is distorted. The terminal is a backwards windows shell that is useless for any development. There is no ssh installed by default, swiping the trackpad is horrible and generally battery does not last longer than 3 hours.
Also I have to pay for things I never wanted such as touch screens that only encourage people to comes and put finger prints on my display.
With apple I can install homebrew and via the terminal just install whichever packages I need for development with sane defaults. I have no had to mess with environment variables once, something I painfully remember from windows.
I would hate my life if I had to develop on windows honestly
Back in the day, a company with a money-printing machine like the iPhone, e.g. Ma Bell with telephone service, would create a world-class R&D division inventing all sorts of stuff with no regard for short-term profit. Google X may have aspired to this at some point, but they seem to have backed off. Sadly, the modern company has eliminated this drag on quarterly profits.
Apple was great because they had a unified vision for computing and they did the entire tech stack "correctly". Time machines were never going to be more than a round off error on the balance sheet, but they did it because it was the correct thing to do. An apple laptop connected to an LG or Dell monitor looks and feels wrong, regardless of how technically impressive the monitor is, because LG and Dell don't have the design sensibilities that apple has.
I hope Apple rediscovers and recovers that lebensphilosophie.
Oh, for fuck's sake. Have you even used the 2016 MBPs, at all? What's your current machine, and what do you run on it?
Ever since the launch of the new MBPs, it has become sort of a meme to rag on them, and it's almost always by people who haven't even used one. Nobody seems to be able to really come up with a reason WHY they're not good. When pressed, those people just resort to inane hyperboles and grasp at flimsy straws, like "emoji keyboard" and "over 9000 dongles!" When offered the fact that the new MBPs have outsold everything else out there [0], they pooh-pooh it with "That's only because of the long delay between releases!" pff.
Other than the fact that you may need at most 1-2 extra pieces of equipment to plug in your legacy devices, the 2016 MBP can do everything your 2014 can.
I'm a power user and consider myself an inspired person who likes to build things; I have the 2016 15" MBP, and it appeases me. So your point in the original comment is invalid, unless you want to play the "I'm more of a power user than you!" game.
[0] http://www.forbes.com/sites/brookecrothers/2016/11/08/new-20...
So while most of us criticizing are more than happy to use and purchase a 2016 MBP - I won't speak for anyone else - but I hesitate to invest further in a product I will use daily for many years, and that has such a potential influence.
We are moving to Chromebooks next year and I fully expect to teach every student how to build a simple app, on the device, and shared with their friends in the first 30 minutes. You simply cannot do that on iOS.
I know all the technical and philosophical arguments in favor of doing this, but most people neither know nor care, and their anger is reaching boiling point. Apple won't be the first target, but when enough people are angry enough to take action that's not going to be any comfort. My advise is use it or lose it, because angry people don't make good listeners.
Since Apple's market cap is now $790B, half the value is $370B, which means that even with the cash reserves, they'd be $123B short of being able to repay, and they'd need it available on day one to execute the hostile takeover. And like they say, $100B here, $100B there, soon you're talking real money.
Essentially Apple's available cash is much less than it appears.
That's certainly one way to put it.
cool idea though
You just go to the new york stock exchange and start buying up the publicly traded stock.
In the case of Apple, it's probably a bid of near $180 a share, or $900B. Then Tim Cook goes out to institutional investors who own big chunks of stock (maybe 1% at most) and lobbies them to vote against it.
No bidder is going to be able to buy 51% of Apple in the open market in any reasonable length of time, by the time they get near 50% the price is over $400 a share.
Look at Volkswagens chart from 2005 to 2008 when Porsche was buying shares for a takeover. It started at around 33 euros, and quickly went to 70 euros after a year, eventually hitting 200 euros when Porsche got to the 40% level, and briefly spiked over 1,000 euros just before Porsche quit and was forced to dump its shares.
That is a 4-8 X return on Porsche's investment.
They came out WAY ahead. Good for them.
If price is low, then buy. If price goes into the stratosphere then sell.
Either you succeed and buy the company or you make billions on your investment.
Also they were buying on credit (leveraged buyout), which blew the whole thing up badly. And a bunch of people tried shorting it without realising the limited liquidity of VW, and got squeezed badly: http://www.reuters.com/article/us-volkswagen-idUSTRE49R3I920...
Even if you bought 10M shares a day, you'd drive up the stock price substantially (like 2x), and now you need over a year to do it. Again it would be obvious.
When Porsche tried to be sneaky about buying VW, they started in 2004 when VW was 33 euros a share. By mid 2005 exchange rules forced them to admit what they were doing, the stock price had doubled and they hadn't even gotten to 20%. By the time they reached 40% the stock price was over 200 and actually peaked over 1,000 for a day before Porsche capitulated and was forced to sell their shares.
Thats why acquisitions are done with tender offers. The buyer may try to buy shares before the tender, but have to be careful not to break exchange rules or the law that obligates them to publicly report 1% and 5% positions when they get there.
A tender offer just says, we'll buy X% for $Y per share, and allows every shareholder to sell shares at the same price with the same info.
Apple can do something on its own, the technology of these makers will won't be worth in the long term anyway.
Still a staggering amount though.
[1] https://images.apple.com/newsroom/pdfs/Q1FY17ConsolidatedFin...
The company's short-term and long-term debt total $77B, but they can repay that over time from future profits. All other liabilities on the balance sheet are ordinary items like accounts payable and deferred revenues, and those will be fulfilled during the ordinary course of business too, without ever needing to touch a single dollar of the $246B pile.
Does Apple hold on to $246B because they simply have nothing sensible to use it on and have no need to give it away?
How big can a corporation get before the whole system kind of breaks down or governments break it apart?
That amount of money would be a good start for buying counties outright and building a military.
https://www.youtube.com/watch?v=Ownc_LP3t08&feature=youtu.be...
Less competitors, less focus on initiatives and innovation.
You could argue that part of the reason that Apple hasn't been that innovative the last few years. There's no one company really doing any amazing in their bread/butter of smartphones.
But I think if they really get serious about building cars, they can make good use of some of that money in order to quickly scale up. Where Tesla has to raise billion after billion to ensure they are not running dry, Apple could just use up reserves.
Of course it won't and can't happen, but one can dream.
And if you "win" that auction, Elon will probably just devote even more of his time and energy to SpaceX.
Jobs asked Apple to buy NeXT. When they did, he explicitly refused to return as an employee. He only changed his mind laster because they were such a mess and he had an emotional commitment to Apples success, because he founded them. And at the time, he only had one other major interest, Pixar, and it was mostly run by the Pixar folks, Jobs wasn't writing or directing movies or developing animation technology for them.
Purchasing Tesla is almost certainly a hostile takeover at an insane price tag. Elon Musk has no need of money or to sell the business, his highest priority is to be able to run it without being told what to do by anyone else. Elon Musk has no emotional connection to Apple, but has a huge one to SpaceX, which he is super actively involved in all strategic planning.
Tesla would be a terrible acquisition and there isn't enough money in the world to convince Elon to let Tim Cook be his boss, and to spend his time designing phones and computers instead of rockets and electric cars.
If Apple won the takeover bid, Elon would cash out his shares and pour the money into SpaceX and new businesses, and tell Apple to kiss his ass.
People often criticize Twitter for trying to be Facebook instead of just being Twitter. Why shouldn't Apple just be Apple?
They are not sitting around doing nothing. They cannot just print new innovation every year, it doesn't work like that.
The problem will be when the market is fully saturated and people start upgrading every 5-10 years instead of the current 2 years.
The Buffett investment (actually his sub-managers did the investment I'd bet) is an example of Apple gradually becoming a more attractive investment to value investors as it gradually becomes a worse investment to growth investors.
I guarantee if iPhone sales plateau every shareholder who dumps their share will be replaced by a new shareholder. Value investors love nothing more than predictable cash generating businesses with low capital requirements.
No tree can grow to heaven and the growth potential for the most profitable business on earth is equally limited. There are investors for zero profit growth "stories" and investors for proven businesses with tremendous moats.
The Twitter case is quite different; it's not as if Apple is going to turn the iPhone or Mac into a car. The problem with Twitter was that the original product vision was never coalesced and realized properly. Twitter in some ways is a beautiful thing that Apple, Microsoft or Facebook could never produce, but for whatever reason that was not good enough for stakeholders and they reached beyond their grasp.
The obvious solution to this is to cut out the middle-man and just return a good chunk of the cash to shareholders. But that never happens because reasons.
But, "hoarding" here means that Apple is neither directing investment directly, nor returning the money as dividends to its stockholders, right? I'm guessing the reason is because Apple is investigating future business opportunities which may require deep pockets. In other words, it's possible Apple is involved in exploring some future, highly speculative investment in a new industry, so that they can be "the next Apple" in some economic venture other than phones, tablets, and desktops.
Just to take one example: developing, producing, and marketing a self-driving car will cost a bundle. And, who really knows what Apple is up to? It's fair to say they may have many pokers in the first right now.
- Does this dilemma exist for decisions made by Braeburn Capital and other Enterprize VC's ?
- And if not, isn't it possible to create a financial structure that will enable businesses run/own more integrated lower-margin businesses ?
Apple has suffered through the tough times in the 90s where they almost went out of business. Having that much money means Apple can take greater risks and still suffer through multiple failures.
The biggest problem is most of that cash came from iPhone revenue and if you remove that, Apple doesn't have much breathing room to take the same amount of risks.
Apple is currently placing a bid for Tosibia's memory business that could cost up to $30 billion dollars.
Nothing is a sure fix for tanking businesses.
Yahoo didn't do anything to help themselves, there's nothing innovative or useful about them. Google, Facebook, Twitter, Instagram is what is draining the life away from Yahoo.
I was (in hindsight, correctly) skeptical of MM and her gang's effort to pull more eyeballs into Y! with things like Tumblr and in smaller extent bringing in people like Katie Couric and David Pogue. Personally, I don't know what Yahoo! is and that makes me hard to tell whether they're doing the right thing at all. As much as we love to hate MM, I don't know if any of us could do any better.
Apple, I sort of get what they are. They are a hardware company that (at least presently) sells phones for $800 that has a bill of materials of about $250. They can use the rest of the margin to make the phone as appealing to consumers as possible. Everything else is a side show. (sorry mac fans) Now where does Apple go from here?
I think about the narrative in the iPhone ten year anniversary podcast (listened to it because it was on the front page of HN so thanks to whoever submitted it) that Apple had to cannibalize its iPod business and started thinking about at least two years before the iPhone was released.
Unpopular opinion but I think it is unlikely that Apple will get the next big thing right. I don't think self-driving cars will not be a high margin business. Yes, I want electric cars and self-driving cars to become mainstream because I want one for myself. There's no way I will buy a $60k+ car in the next five years. But I digress.
Like what I read from what GP said, I think Apple will likely fail not once but multiple times. It is easy to forget the bad old days:
> Since then there has been a lot of noise and shouting, but little has changed. The smaller dealership continues to sell sleek Euro-styled sedans and to spend a lot of money on advertising campaigns. They have had GOING OUT OF BUSINESS! signs taped up in their windows for so long that they have gotten all yellow and curly. The big one keeps making bigger and bigger station wagons and ORVs.
from in the beginning was the command line by neal stephenson http://cristal.inria.fr/~weis/info/commandline.html
If you have that much money, it means you didn't "take greater risks and suffer through multiple failures" in the years preceding.
Buying Toshibas memory business.. that again seems like some bean counters incremental improvement on their iPhone margins. They are going to incrementally improve themselves to death if they can't figure out something new.
> If you have that much money, it means you didn't "take greater risks and suffer through multiple failures" in the years preceding.
So Apple Watch? Is that a success or failure?
The $3 billion+ purchase of Beats? That everyone said was going to be a waste of money?
AirPods?
Mac Pro redesign was a failure.
The car business that could easily burn through several tens of billions?
There's nothing truly innovative about Apple that no one can replicate but Apple is lucky lately with more people buying more of their stuff like 20m Apple Music subs, popular AirPods, Apple Watch, etc.
Beats? Can't tell from outside, but I'm still skeptical.
AirPods? Reviews have actually been great, much better than first impressions. Sales? Who knows.
Mac Pros actually probably made good money for Apple, but strategically was an awful decision. They milked the form factor for sales, likely sell around $500M a year of it without any upgrades/investment for now 4 years. But given it was a poor solution for most Pro users, it's sales are just a symptom of a ton of pent up demand that Apple isn't meeting. Plus the loss of users abandoning the platform because the top end was capped so low.
The car business is a puzzle and unlikely to ever turn out well.
Apple is truly innovative in the best ways possible, which is why it's so successful. Xerox invented GUI computing, Apple figured out how to make it work much better and fit it into a $2,000 box the masses could use. MP3 players were around for years, Apple made them far more usable. Tablet computers were in development ever since Go in the 90s, no one every cracked it for mass markets until the iPhone and iPad. Apple's attention to detail with the proximity sensor and multitouch and a dozen other innovations is what made a touchscreen phone finally usable (and why Google ripped all the keyboards off their Android prototypes the day after they saw the iPhone).
But mobile app design, and Apple's success gave many people/companies great expertise in design, And some do put the effort and attention to detail that is required.
So in today's world, is that enough ?
And if not, that might explain why Apple's watch wasn't meaningfully better than Android's - although it did made more money, probably, mostly because of brand and market position.
I bought an Apple watch for development, but it's been a pretty good purchase all around. Two years of value and it works better than ever. I can't say the extra functionality makes it worth more than an android watch costing a few hundred less, but I suspect they do given it's something you wear every day.
But until then those profits are trapped overseas. Apple can borrow against them to pay dividends, but that only goes so far.
Or return it to shareholders via dividend or share buy-back.
Most of this money is stored on things like multi billion factories manufacturing exclusively for Apple. For my company we went to some of them, and you get the impression of being on a huge manufacturing Catedral. Apple has a scale nobody in the world has, and I am used to see lots of factories, from cars' to refrigerators's manufacturing places.
If this money figures as cash it must be only for fiscal or "not telling your competitors how you do things" reasons, but this scale exerts an enormous pressure over suppliers.
Where does Apple make cars?
An interesting comparison here is IBM. Like Apple, IBM's operations generated a huge amount of cash in the early days. Way more than they needed to run the business. As a result IBM bought real estate. They bought up large parcels near cities and transportation hubs and office buildings etc. In the Bay Area you can see their Almaden Research center, an example of some property they bought in the 60's. When IBM lost their way in the 90's and it was looking like they were toast, they survived by selling off a lot of that property and living off the proceeds. Apple could conceivably operate for 15 to 20[1] years off just their cash on hand.
That said, given today's market rates for cash (under 2% and sometimes even negative), almost anything that wasn't completely stupid would likely give them a better return. And that is something of a conundrum for economists who are wondering why all these companies are sitting on so much cash. It really depresses an economy when there isn't enough cash running around in it to operate it.
Then 'what should they invest in'? Is a solid question. I felt they should build a web crawler/search engine, dump the last dependencies on Google for their destiny. But clearly they are looking at self driving cars (see the story about getting a permit to test in California) they are developing CPUs (they could create an actual semiconductor subsidiary if they wanted). And then there is the challenge of 'where' the money is.
First and foremost a number of people would argue that the 'cash hoard' consists in no small amount of unpaid taxes, which is to say taxes that have been avoided through a variety of legal schemes from being paid to the governments of the territories where they do business. And that argument is bolstered by the fact that Apple doesn't move cash around in order to avoid taxes on it (the whole repatriation thing). On the one hand if the governments give up their claim on any taxes owed, then Apple is free to collect the money into the jurisdiction where it can be invested most profitably, on the other hand there are civil servants who would really like to get their hands one some of that cash[2].
Bottom line is that there isn't a point, but various conditions have made holding cash the default choice.
[1] Their cost to operate would go up as they were non-profitable but their headcount could go down if they weren't in product production.
[2] And in many cases the governments believe it to be 'owed' even if there is no legal statute that states that.
Ben Bernanke referred in 2005 to a "global savings glut". The conditions which led to that haven't changed much over the past 12 years.
Gross domestic private investment, fixed nonresidential investment increased 2.8% between 2004 and 2014 (I exclude investment in fixed residential structures as that plummeted by 4.9% in that time frame). Computers and software was the sub-field where investment increased the most, by 6.1% a year ( https://www.bls.gov/emp/ep_table_405.htm ).
Whereas from 1994 to 2004, gross private domestic investment increased at a rate of 5.5% a year. Computers and software investment increased at an average rate of 26.5% a year between 1994 and 2004 (ref: same link).
You have to measure investment against GDP and profit rates as well.
In short, Apple is doing what a lot of people with liquid capital are doing, holding onto it.
Cutting one time brings back lots of capital to invest, lots of that will be paid to shareholders, who will spend some and reinvest some. With similar effects, for that year.
(And yes, I understand that the cash isn't just stuffed in a mattress, but it's an important distinction that the money isn't being invested in the direct sense)
1.) Apple pay. Apple pay has not caught on, and perhaps Stripe could push it over the tipping point.
2.) Acquire Stripe's team of amazing designers, front-end engineers and operations engineers.
3.) Further revenue into Apple's increasingly massive services business
Payments processing is a very slim margin business. From their 2.90% and $0.30, Stripe will make about 1% on average, the rest goes to Wells Fargo. That doesn't seem too bad except that Stripe's total processing volume can't nearly justify that crazy valuation.
Toyota Motor Corp 174.2B
Daimler AG 75.8B
Volkswagen AG 71.9B
Honda Motor Co Ltd 52.0B
General Motors Company 50.0B
Tesla Inc 49.5B
Ford Motor Company 44.2B
Nissan Motor Co Ltd 39.3B
Tata Motors Limited 22.5B
Ferrari NV 13.3B
Harley-Davidson Inc 10.5B
:)
But how can a company fold and still have money left? Typically if companies stop operating, it's because they have no money left to pay their bills and debts.
They could pay out half of their fund and still make do with $123B in the bank.
They are returning a lot of money to their shareholders: through dividends and share buy-backs. They plan to have returned $250 billion in capital to the shareholders by the end of march 2018.
They are also partly limited in their options: most of the cash and equivalents is stuck abroad, and subject to a 35% tax if repatriated to the US. It doesn't make sense for their shareholders to repatriate that money if a tax holiday (which means they would pay around 10% instead if history is any guidance) is very likely in the near future. In the mean-time they can borrow to finance the capital returns, but it would be unwise to overdo the borrowing.
Also not sure what you mean by "the economy", since the majority of that cash is likely not in one country...
It occurs to me that the problem isn't wealth inequality, but opportunity cost. If you subscribe to the corporate ethos, life is fantastic right now. But if you don't, then you're likely struggling to make rent. Large multinational corporations are standing in the way of progress in a way not seen since the gilded age.
P.S. I like Apple and have always owned a Mac. This is not directed solely at them, I just think that this is not the progress we're looking for.
Large multinational corporations are
standing in the way of progress in a
way not seen since the gilded age.
Yes, operating within confines of someone else's corporation, or beneath the general corporate regime in general, is stifling, and you, yourself, and I, myself, are unlikely to benefit as handsomely as those whom are in control of the corporation or their regime. But I wouldn't say progress-in-general is being held back by large corporations.
I also wouldn't say that Apple locking up 250B in a bank account represents them withholding the freedom of others to operate, by blowing that kind of cash frivolously, and putting it back into economic circulation. I'd say it's their windfall, and they've clearly been saving up for the next big leap they're about to take.
If anything, progress is moving right along at kind of an insane pace. Almost too fast. Kind of too fast.
I get that certain avenues of progress have been held back, and one might draw a correlation between internal combustion and leaded gas in the 20th century, and file sharing and proprietary software in the 21st century, but these examples are narrow in scope.
When you step back, look at the whole picture, and take the way things are today, and hold that up, next to the way things were 20 or 40 years ago, the differences are kind of shocking. Things are radically different, showing drastic changes between each generation.
Sometimes I think if we went faster, everything would burst into flames just from the ambient friction of social upheaval incidental to rapid change.
If giving 2.5 million entrepreneurs $100k would be a good investment, I have no idea. But regardless of Apple's nest egg, you need to make that argument.
Look at Y-Combinator. It's literally never been an easier time to not only fund a startup, but to get first class support and advice while doing so.
Kalanick is the sort of walking PR disaster Apple's good at avoiding hiring.
Basically Lyft is a plaything that only looks the same as Uber if you only consider the US market and picking up and moving people. Even then, it's a distant number two.