Reducing Unemployment With A Private Sector Stimulus

Last week Apple shared sales figures and announced its financial results for its most recent quarter. The biggest news is that they have $97,600,000,000 cash on hand. Yes, that’s $97.6 Billion, but about two-thirds of that is sitting in accounts overseas because Apple is a large multinational company that sells it’s products all over the world.

Apple is by no means alone. Google, GE and several other multinational companies also have huge reserves in foreign accounts as a result from sales abroad of which they’ve already paid taxes on profits in those countries. Here and here you can see Cisco’s CEO, John Chambers talk about how Russia and China is more business friendly than the U.S. and why he can’t bring the company’s $43 Billion back to the United States. JP Morgan Chase estimates American companies have $1.4 Trillion (with a capital T) sitting in foreign bank accounts because with the current tax code in place it simply doesn’t make sense for these American companies to pay 35% in corporate taxes from sales they’ve made in foreign countries. The huge majority of other developed countries charge their multinational companies 2% or less on foreign profits when they bring their money back home.

American companies want to bring this money back home to hire employees, invest in research and development and roll out new products. Tax revenues would increase when the unemployed are hired by these great American companies, but it appears we are too short sighted to entice companies to bring their profits to the U.S. The good news is most politicians would like to see this money come back home, but there is a lot of talk about the best way of making this happen. Some have proposed a temporary tax holiday for these companies to bring this money back to the U.S. while other members of Congress would like for repatriated earnings to be permanently lowered in a new tax overhaul plan. The bad news is historically not much progress is ever made during election years. It seems there is more incentives for politicians to nothing during election years than to pass legislation that could get the economy moving.

Another huge stimulus for the economy would be to attract more foreign direct investment in the country which would create jobs for the unemployed. With the 35% tax rate (of which most companies don’t even come close to paying) foreign companies will choose to invest their money elsewhere. Everyone knows foreign direct investment is the best way to reduce unemployment, but foreign companies are choosing to invest in other countries instead of the United States. With all the anger and public backlash towards large corporations it makes it more difficult for politicians to work with corporate executives, but if the U.S. is going to compete with the rest of the world we need to create a business friendly environment for companies that choose to invest here.

Other than being American, I have no direct interest in a lower tax rate for repatriated earnings because I have no money in overseas accounts. I’m going to use this election year however, to communicate this issue and others to the Congressmen in my district and hope other readers give politicians more of an incentive to act than to do nothing. Find your U.S. Senators contact information here and members of the House of Representatives here. Congress has one of the lowest approval ratings in history, but fortunately for them there is no term limits so unless you act legislation that could help our country may never be passed.

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1 thought on “Reducing Unemployment With A Private Sector Stimulus”

  1. I am one of the few liberals that support lowering corporate tax rates, as long as we close loopholes, and increase capital gains and dividends rates, and start taxing unrealized dividend eranigns. On the other hand, corporations do not make investment decisions based on whether the corporate tax rate is 35 or 25%. Capital investments closely follows demand, not marginal tax rates. Furthermore, persistent unemployment rate is due to slack in agreagate demadn and not on marginal tax rates (See: We have structural problems that is dragging rapid growth. I dont think a change in the marginal corporate rate will solve our problems. On the other hand, i agree is a start in order to bring the flight of capital back home.

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