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Tech Firms Keep Piles of 'Foreign Cash' In US 427

Posted by Unknown Lamer
from the hanging-out-on-rusty's-yacht dept.
theodp writes "There's a funny thing about the estimated $1.7 trillion that American companies say they have indefinitely invested overseas,' reports the WSJ's Kate Linebaugh (reg. or the old Google trick). 'A lot of it is actually sitting right here at home.' And if tech companies like Google and Microsoft want to keep more than three-quarters of the cash owned by their foreign subsidiaries at U.S. banks, held in U.S. dollars or parked in U.S. government and corporate securities, Linebaugh explains, this money is still overseas in the eyes of the IRS and isn't taxed as long as it doesn't flow back to the U.S. parent company. Helping corporations avoid the need to tap their foreign-held cash are low interest rates at home, which have allowed U.S. companies to borrow cheaply. Oracle, for instance, raised $5 billion last year, paying an interest rate roughly two-thirds of a percentage point above the low post-crash Treasury yield, about 2.5% at the time (by contrast, grad students and parents pay 6.8%-7.9% for Federal student loans). Were the funds it manages to keep in the hands of its foreign subsidiaries brought home and subjected to U.S. income tax, Oracle estimated it could owe Uncle Sam about $6.3 billion."
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Tech Firms Keep Piles of 'Foreign Cash' In US

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  • by h4rr4r (612664) on Wednesday January 23, 2013 @10:34AM (#42669675)

    No.

    We have TANF(Temporary Assistance for Need Families) and unemployment insurance.
    Both are temporary and the first is only for families. The latter is also not available in most states if you quit, are fired for cause, or were not working for more than some amount of time, normally a year.

  • by causality (777677) on Wednesday January 23, 2013 @11:03AM (#42669991)

    So then we should have no taxes at all?

    If you want to benefit from our civilization you should expect to have to pay for it as well.

    You avoid all these problems by taxing consumption instead of income. Not to mention, rich people consume quite a bit more than poor people so this nebulously-defined "fair share" would be achieved. The Fair Tax Act would take care of all of this neatly without burdening the poor, since those at or below the poverty level would pay no net taxes.

    Of course, like any proposal that would drastically reduce the government's control over us, the Fair Tax Act gets demagogued left and right by two major groups of people: political forces that love the carrot-and-stick methods of behavior control that an income tax provides, and those who have never seriously researched it and have no knowledge of it beyond hearsay.

  • Re:Holiday (Score:5, Informative)

    by IamTheRealMike (537420) <mike@plan99.net> on Wednesday January 23, 2013 @11:11AM (#42670111) Homepage

    The loopholes exist because of the economic benefits. RTFA, the USA is the only economy in the developed world to try to tax foreign earned income the same as domestically earned income. This is true for citizens and green card holders too, by the way, which places US citizens into the unique and perverse situation of moving abroad and still paying Uncle Sam taxes, despite getting no services for that tax.

    For US persons, this is merely an unfair affront to basic common sense. For US companies it's the difference between being competitive or being double taxed into total lack of competitive-ness. So these "loopholes" as you call them have been around for a long time and don't get closed because they're the thing that's keeping US business on a level playing field with the rest of the world.

    You're right that the US tax system should be simplified and loopholes removed. If the US gave up on trying to tax income regardless of where it was earned, it'd be the same as every other tax system and there'd be no need to maintain these "loopholes", they'd just go away naturally. Also, US companies would be more likely to spend foreign earned money in the USA because there'd be no double taxation. And US citizens would not be trapped by the financial "Berlin Wall" that is resulting in them being systematically evicted from the worlds financial institutions. It'd be a win all round, but of course, nobody in Congress is talking about doing that because it'd be revenue neutral.

  • by Anonymous Coward on Wednesday January 23, 2013 @11:50AM (#42670561)

    You avoid all these problems by taxing consumption instead of income. [...]

    Poor people consume about 100% of their income. Rich people significantly less. If you're really rich, you will have trouble consuming even a single percent of your income, let alone a significant portion thereof.

    Second, define "consume". That private jet you're flying around with costs $30 million to buy. But did you buy it, or did company X in the Bahamas buy it? Or did they maybe rent it from an owner in Lichtenstein or Luxemburg? Maybe it doesn't exist in a taxable sense at all. OK ... but that Coca Cola you're drinking - that's a clear-cut case of consumption isn't it? Or is it? Where did it actually come from, and when was it purchased in the US, in a taxable sense? Maybe it was sold and bought in the US, but the price was $0. Maybe it never was sold in the US, but purchased overseas, and then imported directly by the consumer. Maybe it was worth $0 when it crossed the border, or maybe it the import duty due was less than the tax would have been. Maybe it was simply a gift, from the company that belongs to you (just not in a taxable sense) via a subsidiary on the Caymans, or in Switzerland. Buy? Piffle! You're so rich you never have to buy anything, ever ... in a taxable sense, that is.

    All the while $PoorDude is paying 15% tax on every single thing he buys. Or make that a round 20%. Do I hear 25%?

  • Re:Holiday (Score:4, Informative)

    by Chowderbags (847952) on Wednesday January 23, 2013 @12:25PM (#42670995)

    which places US citizens into the unique and perverse situation of moving abroad and still paying Uncle Sam taxes, despite getting no services for that tax.

    Except that you can exclude the first $90000 or so of income from taxation and generally deduct foreign income taxes from your US taxes.

  • by azadrozny (576352) on Wednesday January 23, 2013 @12:40PM (#42671233)
    One could argue that the extra benefits are artificially raising the cost of living for everyone. I don't mind programs that temporarily help people "down on their luck", but to give such benefits, year over year is irresponsible.
  • by fredrated (639554) on Wednesday January 23, 2013 @01:12PM (#42671675) Journal

    As soon as you eliminate the government, my friends and I will be over with our guns to take everything you own.

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