Here’s Why Tech Leaders Are Rooting For a Tax Holiday
A bill currently making the rounds on capital hill proposes a one year discount on overseas income taxes for American companies that would slice the government’s share of the pie from 35% to 5.25%. The idea has garnered much public support as U.S. businesses are sitting on higher stockpiles of cash than any time in history, much of which is revenue from operations overseas that corporations are slow to bring stateside due to the high tax rates. In the midst of the current debt crisis, it seems like a common sense move for the government, which would still gain a significant chunk of taxable revenues from corporations’ overseas earnings, to get behind the bill as a means of narrowing the fiscal budget gap. Technology (NYSE:XLK) leaders based in Silicon Valley would stand to gain quite a bit from such a move, as the San Francisco Chronicle offers a look at just how much these firms could profit.
Google (NASDAQ:GOOG) stands to make among the most of tech firms, with an estimated $18 billion it is holding onto from overseas earnings. At present tax rates, the company would forfeit $6.1 billion of that amount in taxes, but with the holiday Google would save $5.1 billion, with the government still banking nearly $1 billion in revenues. Apple (NASDAQ:AAPL) is thought to be holding some $12.3 billion in overseas earnings, and would save over $3.7 billion on a holiday. Oracle (NASDAQ:ORCL) would save $4.1 billion on $16 billion in revenues abroad, and Microsoft (NASDAQ:MSFT) also stands to gain savings of $8.8 billion on a $29.5 billion stock of cash that is currently “permanently reinvested” in foreign markets.
Lobbyists for the bill argue that the move is a no-brainer because at current tax levels big tech firms and leading businesses from other sectors will never bring that money back stateside. D.C. lobbyist WIN America’s advisor notes, “It will inject upwards of $1 trillion into the U.S. economy at very little if any cost to taxpayers.” The businesses saving money could also use proceeds from the holiday to reinvest in operations (could create new jobs), issue shareholder dividends (more cash in hand for investors), or re-invest earnings in American securities, none of which are bad deals for the economy.