According to a recent J.P. Morgan report, U.S. companies hold a combined total of more than $2 trillion in cash abroad.
Among all S&P 500 companies, Apple has parked the largest amount of cash outside the U.S. by quite a margin. The iPhone maker hoards $158 billion (89 percent of its total cash) overseas. That’s almost twice as much as second-ranked Microsoft ($82.1b) and 2.5 times the total of General Electric, which is ranked third with foreign cash holdings of $62.4 billion.
Under current law, U.S. multinationals have little incentive to bring home the cash they hoard overseas, because they would have to pay 35 percent corporate income tax once they repatriate their foreign earnings. To address this issue, two senators proposed a repatriation tax holiday earlier this year, which would enable companies to return money to the United States paying just 6.5 percent tax, not 35 percent. The bipartisan proposal suggests the proceeds could help finance the Highway Trust Fund which is expected to run dry in May. It would also limit the use of the repatriated funds, prohibiting their use for stock buybacks or executive compensation and funnelling them towards investment beneficial to economic growth in the U.S.
Although considered unlikely, it wouldn’t be the first time Congress passed a tax holiday for foreign earnings. In 2004, companies paid just 5.25 percent taxes on repatriated cash. However, a congressional subcommittee later found that the measure hadn’t been effective: many of the companies that profited most went on to cut jobs and reduce R&D spending in subsequent years.
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