Hacker News Reader

Comment by awa | Hacker News Reader

You are missing that the reduction should cause some money sitting in coffers outside to flow back in to US. Microsoft, Apple, Goog etc have billions of dollars parked outside the country.

View on HN

>You are missing that the reduction should cause some money sitting in coffers outside to flow back in to US. Microsoft, Apple, Goog etc have billions of dollars parked outside the country

They won't bring it back if they have to pay 15% on it.

We let them bring it back for 5% in 2004 and the result was a net loss to the taxpayer, if I remember correctly. https://www.wsj.com/articles/SB10001424052970203633104576623...

Businesses which repatriated money ended up shedding jobs and cutting R&D, which hurt all Americans outside of the Capitalist class. And the lost revenue from the tax break cost the taxpayer billions.

But, of course, the biggest reason to avoid this scheme is that it failed.

12 years after we did this scheme to bring back some $350 billion, these companies learned that we can be bent to their will, and now they've hoarded some $2,500 billion. Nearly 10X larger horde!

If we give in a second time, we reinforce this behavior that they can horde their money until enough useful idiots will give them anything they want to bring it back. Rinse, and repeat the next time enough useful idiots think that bribing you today will stop you from demanding the bribe again tomorrow.

We let them bring it back for 5% in 2004 and the result was a net loss to the taxpayer, if I remember correctly.

Well, 5% is probably too low. And I think they will bring it back for 15%. It costs money to maintain all these tax-minimization schemes globally. And America is still Apple's biggest market by far. Being able to leverage all that cash here could make a big difference to their bottom line.

Had it not happened, the US government would have gotten 0% of the money and their US operations would have been even more cash-starved.

The US operations aren't cash starved; they can repatriate unlimited funds for operations with no problem, since operations are all deductible expenses which would result in no tax hit from bringing the money back.

Cash starved? These businesses are fine. They can borrow money domestically using the foreign horde as collateral.

If they are cash starved, it's because they have no credit and no horde.

Yes, but the argument is that there would have been no showing of weakness that incentiveized corporations to hoard money for the next round.

Is there evidence of this? Tax reduction proponents often claim some offsetting benefit, but rarely does it seem to come true. Look up the Laffer Curve from the 1980s, when the Reagan administration claimed that tax cuts would spur economic activity and actually increase tax revenue.

Also, to a degree it's based on the premise that these companies are overwhelmed with high taxes and that is determining their behavior. Perhaps they have other motives or the rate isn't really too high for them.

The evidence is that US corporations are stashing ~$2 trillion dollars offshore. I'm not saying cutting taxes will fix the problem, but it is very apparent that the current tax rate is determining their behavior. Unfortunately it can become a race to the bottom for countries trying to capture the taxes on that income.

> it is very apparent that the current tax rate is determining their behavior

That isn't necessarily true. It could be due to other laws, such as the one that allows them to stash money overseas tax-free. Perhaps that's the law that should change.

Yes, I should have said current tax law, not tax rate, but the getting a lower rate abroad is clearly the main driver.

> I should have said current tax law, not tax rate, but the getting a lower rate abroad is clearly the main driver.

I wasn't clear: I don't know that I accept that, though of course I've heard it many times. It's a narrative that suits people who want to cut taxes for corporations, but those people always have very convenient narratives. Has anyone seen evidence?

But income tax revenue grew robustly over the 1980's:

https://www.thebalance.com/current-u-s-federal-government-ta...

Thanks. The gross numbers depend on far more than tax policy; I'm not sure how meaningful they are. The economy tends to grow no matter what the policy, and remember that the US was coming out of what was, at that time, the worst recession since WWII. That said, I don't have evidence at my fingertips.

(Also, I'm not sure what to think of that website: Their anti-government bias seems to show through and their understanding of economics is poor. For example, the following fails basic microeconomics and pricing: the entire U.S. tax burden really falls on individuals. That's because corporations pass on their tax burden to families in the form of higher prices or lower wages. / Corporations must maintain their profit margin to satisfy stockholders, so they pass on any additional corporate taxes to consumers or workers. If only my company could just set whatever price and wages it wanted, and consumers and workers continued to buy and hire on at the same rate!)

There's very little evidence that tax cuts stimulate economic growth. If there was meaningful evidence the investigators would receive the Nobel Prize -- every year. And while economists can be relied upon to provide all sorts of elaborate theoretical "evidence" the actual empirical evidence tends to confirm the opposite: significant tax cuts have zero to negative impacts on growth [1].

It will be interesting though to see what tax cuts do in such a low-growth environment. In the end it seems Wall St. will be the big winner. There's plenty of actual evidence that tax cuts (a) eventually make it back to investors once finance takes its cut and (b) tax cuts lead to most firms adopting a much higher risk profile [2]. Ironically we could see lots of mergers and overseas expansion.

[1] http://graphics8.nytimes.com/news/business/0915taxesandecono...

[2] https://www.bloomberg.com/news/articles/2017-04-19/u-s-tax-c...

> You are missing that the reduction should cause some money sitting in coffers outside to flow back in to US.

No, it won't. The only reason to repatriate it would be to spend it, which (since corporate "income" tax is a tax on retained profits, not income) would result in a 0% tax with or without the tax cut.

No matter how low (so long as it is non-negative) the US corporate tax rate goes, it makes no sense to reptriate the funds and pay taxes on them otherwise.

The money is sitting outside the US because the companies do not need it in the US, or at all. They have literally no idea how to invest money faster than they can think of investment that would yield more profit than a tracker fund.

The only reason to move the money back to the US would be to hedge against a sudden rise of interest rate that would make funding hypothetical future US venture slightly more expensive. Obviously the rate at which such a hedging make sense is probably very low, single digit low.

Does this actually get them to move it here? Apple has huge amounts of money around the world, and I'm not sure what they'd even do with it if they could repatriate it more cheaply. Give it back to investors?

Something tells me the reality of this would not play out like planned. In fact the whole lower the tax for X and have Y also benefits doesn't work!

Reply on news.ycombinator.com