Apple’s repatriation tax set at 15.5% in final GOP bill

Down from today’s 35%, but up from the 10% Trump had proposed.

From Bloomberg’s GOP Tax Plan Sets Higher Rate Than Expected on Offshore Earnings:

The top tax rate that U.S. companies would pay on an estimated $3.1 trillion in earnings they stockpiled overseas crept up to 15.5 percent in the final version of the GOP tax bill released Friday.

President Donald Trump had initially called for a top rate around 10 percent for companies’ offshore profits, but as GOP lawmakers searched for revenue to offset the cost of other tax cuts, one of the sources they settled on was multinationals’ offshore cash.

Under the GOP tax plan that’s headed for votes in the House and Senate next week, earnings that companies hold offshore as cash and cash equivalents would be taxed at 15.5 percent. Income invested in less-liquid assets—including plants and equipment—would be taxed at 8 percent. Both taxes would be mandatory, not optional.

My take: In the end, Republican lawmakers found the extra revenue they needed in those stockpiled overseas earnings, $252 billion of which are Apple’s. No one is going to shed any tears for Cupertino, except maybe its shareholders.

See also:

12 Comments

  1. Richard Wanderman said:

    What will happen to the GOP plan and the deficit if Apple and other companies like it don’t bring all the money back that the GOP is counting on to offset their tax cuts?

    0
    December 16, 2017
    • David Emery said:

      The deficit goes up.

      I liked the idea of using the repatriated money for an infrastructure fund. Instead this is going into the general revenue stream.

      2
      December 16, 2017
      • Richard Wanderman said:

        Indeed. My question was sort of rhetorical…

        This is the same GOP who have continuously voted against raising the debt limit for fear of creating bigger deficits.

        It’s a good thing their base has no memory or understanding of these things.

        I love the idea of using repatriated money (and even a raise in taxes) for much needed infrastructure work.

        0
        December 16, 2017
        • David Emery said:

          Every significant budget initiative I remember from both parties (including, for example, Affordable Care Act) included tricks and gimmicks to manage the -appearance- of the deficit. In the latest tax bill, the individual breaks are set to expire. So when CBO scores this, they assume those breaks won’t be renewed, when the chance of those expiring is pretty close to zero. ACA had some similar tricks with when various provisions took effect.

          At this point, neither party is interested in fiscal responsibility. And that’s a huge problem because it leaves us with no real alternative to deficit spending on pet projects (by either party.) It’s a situation where legislative gridlock starts to look attractive.

          0
          December 16, 2017
          • Brian Loftus said:

            The tax breaks for individuals expire because to pass a deficit increasing tax proposal and make it permanent, you need 60 senators. You only need 51 if it is not permanent. The true deficit/surplus prediction requires a prediction in GDP growth rate. Historically, the President of either party has predicted a higher growth rate than the budget office scoring folks have allowed (not called the Joint Committee on Taxation). I cannot find the source now but the estimates I seem to recall is 2.5 Trillion per 1% GDP with earlier growth more important than later growth.

            1
            December 16, 2017
  2. Fred Stein said:

    This shareholder will shed no tears.(Disclaimer: Not a fan of the tax plan which favors concentration of wealth.)

    Apple’s net IRS tax payments will increase. Their tax payments to California will increase to help address our natural disasters and the people who suffered. They will likely increase buybacks and increase the rate of dividend hikes. They can pay off short term debt as it comes due. And who knows what else?

    The dividend increase matters. We will likely see increases in inflation and interest rates.This will impact the divi/growth portfolio strategies, creating mild pressure on APPL’s yield to go up as the APPL price goes up. Currently the payout ratio is roughly 50% of US profit, but 25% of total profit. Under the new tax code, Apple can sustain competitive dividend yield for years.

    5
    December 16, 2017
  3. David Drinkwater said:

    Sadly, I suspect that non-investors hold Apple responsible, as poster-child, for not repatriating cash. So they certainly won’t be shedding tears.

    Speaking for myself, if I had earned money in a foreign country and paid taxes on it there (all this greatly complicated by the number of days one spends in what country, if you are an actual breathing human being and not a corporation, mind you) [deep breath]:

    I would not want to give 20% of it to the US government just to bring it back to the US and US dollars. 15.5% is already distasteful to me (and I consider myself a tax and spend liberal). 35% is ridiculous. That said, I won’t be shedding tears over going from 35% to an optimistic 10% to an actual 15%. If the policy makes it more palatable for Apple management to use their stash as they see fit, then I’m satisfied.

    We are just talking about repatriating foreign income. It seems kind of mind-boggling to me, but then, it is IP and design practice “Designed in California” that generates those revenues. Surely it’s not all simple, but it doesn’t seem to me that this needs to be as complicated (or expensive) as it is.

    1
    December 16, 2017
  4. Ken Cheng said:

    Just looking back at an old envelope in my files where I had written down tax proposals during Obama’s administration when the various entities were putting out there proposals, I had:
    Obama: 14% repatriation tax on old foreign income; 19% future foreign income
    Senate: 6.5% repatriation tax on old foreign income
    House: 8.75% repatriation tax on old foreign income

    Later I added to the envelope:
    Trump: 10% repatriation tax on old foreign income; 15% future foreign income

    So, it ended up a compromise, a little bit of this and a little bit of that.

    2
    December 16, 2017
  5. “So, it ended up a compromise, a little bit of this and a little bit of that.”

    But without the infrastructure strings Obama wanted to attach to the money.

    0
    December 16, 2017
    • Ken Cheng said:

      Which is only a tiny bit odd, since both the House and Senate seemed open to the idea of using the repatriated tax revs for infrastructure. I suppose when push came to shove, they realized that general revs was better to counterbalance the cuts, since new spending for infrastructure was probably not as palatable.

      0
      December 17, 2017

Leave a Reply