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What Was Left Unanswered In Today's Apple Record Bond Offering

Tyler Durden's picture





 

When people talk AAPL, especially defensively, the first thing they note is that while the growth prospects may be dimming, the company has a massive $145 billion (as of March 31, 2013) in cash and equivalents. Surely, this amount has to be netted out of any P/E calculation making it appears so very cheap, depending on what forward Earnings number one uses. Well, as today's bond offering showed, Apple's cash "here" is not the same as Apple's cash "there" and by here and there we mean domestic and foreign cash. In fact, the only reason Apple, which has a total cash on its books that is larger than the GDP of most countries (most of which is invested in various corporate and sovereign securities but that is irrelevant for now), had to do this bond deal, is that as we showed a year ago, a majority of its cash is effectively non-recourse due to prohibitive taxation requirements that the company would face upon repatriating said cash. Which also means that going forward all calculations that praise the company's cash will also have to haircut the offshore held cash as it is not fully recourse to the US-headquartered company.

So just how much is AAPL's offshore cash?

Well as of the most recent quarter a record 70.7%, or $102.3 billion, of its total cash was held in offshore jurisdictions! This means "only" $42.4 billion is available domestically for balance sheet acrobatics such as satisfying the recent screams for shareholder friendly actions. We say only because don't forget: now that Wall Street is a value company and has to dividend and buyback billions every quarter to satsify its unappeased shareholders, this cash won't last too long...

All of this is known, or should be known by the Apple fanatics, and certainly those who just gave AAPL cash for 30 years in exchange for a sub 4% coupon.

What, on the other hand, seems to be known by very few, is what appears to be a very disturbing trend in the distribution of cash domestically vs cash abroad.

As the chart below shows, when it comes to offshore-held cash, AAPL is indeed a cash cow. And with the bulk of the company's growth prospects, and ever more so, sales abroad, this makes intuitive sense. As noted above, AAPL reported $102 billion in cash abroad, an increase of $8 billion in the quarter. 

This is terrific news... if only the company could dividend, buyback or engage in any other shareholder friendly action with this cash. It can't.

How about cash held domestically? Well, as can be seen in the red bar below, domestic cash has not only stagnated in the $30-40 billion area for two years, it actually declined in the most recent quarter. And yes, this is the cash that Apple has full recourse to, and which it uses to make dividend payments out of, and to fund stock buybacks.

So yes: today's bond offering was purely driven by tax considerations, but what will happen if in the future the domestic cash flow creation continues to stagnate as the US market contracts, even as the Company's cash outflow obligations increase with every passing quarter and ever more vocal shareholders.

In summary: congratulations to Apple for its record $17 billion bond offering today. Perhaps the real question, however, is when is the next one?

 


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Tue, 04/30/2013 - 17:49 | Link to Comment James_Cole
James_Cole's picture

They could always buy 100B of gold outside of the US, folks on here would love that!

This is terrific news... if only the company could dividend, buyback or engage in any other shareholder friendly action with this cash. It can't.

They could BUT..

Tue, 04/30/2013 - 18:13 | Link to Comment bluskyes
bluskyes's picture

Better yet, buy silver, and claim that it's a hedge against rising silver prices - so that they can continue to manufacture electronics. They'd stand a better chance holding silver as a company that manufactures electronics, than the Hunt brothers did holding silver as a sugar company.

The great thing about that would be that the more silver Apple bought, the higher it would go. Plus Apple wouldn't need margin like Herbert, and William did. Just keep taking delivery.

Tue, 04/30/2013 - 18:26 | Link to Comment James_Cole
James_Cole's picture

Doesn't make any sense for them to buy for manufacturing. But I like this Hunts bros idea, if only someone would suggest that at the shareholders meeting. 

Or better yet, start the rumour on here. The secret buyer grabbing up all the phys gold / silver out there? Braeburn Capital! #bullish

Tue, 04/30/2013 - 20:25 | Link to Comment notbot
notbot's picture

Tyler- I don't know any investor who doesn't already know this.

When calculating an ex-cash P/E or enterprise value, you haircut offshore cash by 25-30%. Not just for AAPL, but for all US-based multinationals. Easy enough.

So AAPL has net $110bn of "recourse" cash. Not rocket science. That's still a lot of cash. And there is SOME optionality value in addition on the off-chance we get another repatriation holiday.

The hard part is the fwd earnings. And what multiple you should put on those. The cash part of AAPL's value is a cakewalk

Tue, 04/30/2013 - 17:44 | Link to Comment slightlyskeptical
slightlyskeptical's picture

The question to me is who are they going to buy? I wouldn't be surprised to see them venture further into voice.

Tue, 04/30/2013 - 17:44 | Link to Comment andrewp111
andrewp111's picture

Can AAPL borrow money outside the USA and use that money to pay dividends without paying tax on its overseas cash? If they borrow overseas, they could use the overseas cash to pay back the bonds, and the proceeds of the borrowing to pay dividends, or can they? What is the tax law on sneaky ways of laundering that cash back into the USA?

Tue, 04/30/2013 - 17:55 | Link to Comment Tyler Durden
Tyler Durden's picture

Actually, the bulk of that cash is held right here, in the offices of Braeburn Capital in Reno, NV as we showed here and practically all of it is invested in various Treasurys, MBS and Corporate bonds and stocks. 

However, what is going on, is that in order to avoid taxation on the trades and profits, the "investor" in Braeburn is structured as a qualified Offshore LP - a perfectly legal loophole even if it didn't help Mitt Romney much in his campaign when he got into hot water for usage of precisely these kinds of tax shelters via Bain.

Maybe an even better question is what happens if and when Uncle Obama goes after Apple eventually. What will happen to the various markets in which AAPL has over $100 billion invested.

One can only hope they are very liquid.

Tue, 04/30/2013 - 18:12 | Link to Comment Rainman
Rainman's picture

Oblameo going after AAPL..?? ...stop it, you're killin me !

Tue, 04/30/2013 - 18:16 | Link to Comment toys for tits
toys for tits's picture

Apple and the US government have the same credit rating.  

This is strange since Apple can't force people at the point of a gun to give it money.

Tue, 04/30/2013 - 18:57 | Link to Comment Cult_of_Reason
Cult_of_Reason's picture

Neither AAPL can print money nor confiscate citizen’s gold/savings.

Tue, 04/30/2013 - 18:18 | Link to Comment candyman
candyman's picture

Thanks, I was just going to post that question?

Tue, 04/30/2013 - 18:43 | Link to Comment Cult_of_Reason
Cult_of_Reason's picture

AAPL has bought its own debt today via Braeburn Capital (aka repatriated $17B of its offshore cash without actually paying any taxes).

Someone (Braeburn Capital?) was selling treasuries today (10-year yield mechanically spiked up from 1.638 to 1.679 within one hour in AM prior to the auction) to buy AAPL debt.

Tue, 04/30/2013 - 18:49 | Link to Comment NotApplicable
NotApplicable's picture

There it is! I just knew there was a mechanism to launder that money somehow.

And with Lloyd's blessing, no worries, right?

Tue, 04/30/2013 - 20:18 | Link to Comment Aurora Ex Machina
Aurora Ex Machina's picture

I made a comment ages ago about the possibility of using Braeburn to buy back stocks to turn it private if they ever needed to (do a GREP).

I assumed this kind of hi-jinks was illegal, so didn't push it in this case. If your thesis is correct, Apple just bought off Wall st. with a cut to GS and fucked the IRS right up the wazoo.

 

 

More importantly, how would the shareholders and Hedge funds react to this, if you could prove it? (And I really hope you don't have a hot tub if you're right).

Wed, 05/01/2013 - 09:27 | Link to Comment Cult_of_Reason
Cult_of_Reason's picture

Most likely it was done indirectly in multiple steps using derivatives and swaps. If you examine the books, all you will find is Apple's Braeburn Capital subsidiary buying from Goldman "hedges".

BTW, it appears right before this debt offering, a couple of weeks ago, Braeburn Capital left Reno. It is no longer located at its last reported address. The office at that address is now in use by another firm, Randstad Finance and Accounting. Apple's record filings do not provide a new address. The receptionist said that she only knew the firm is no longer operating at that location and that she didn't know where it had relocated.

Nevada Business Search keeps returning an error

http://nvsos.gov/sosentitysearch/corpsearch.aspx

Tue, 04/30/2013 - 18:34 | Link to Comment NotApplicable
NotApplicable's picture

Steve Jobs fought the law, and the law won. (although he did best the Cali DMV by never leasing a car for longer than the licensing grace period (6 months)).

Tue, 04/30/2013 - 17:45 | Link to Comment McMolotov
McMolotov's picture

"...a majority of its cash is effectively non-recourse due to prohibitive taxation requirements..."

Apple follows the Simon Black school of thought when it comes to keeping shit overseas. It'll come back to bite them in the ass, too.

Tue, 04/30/2013 - 17:51 | Link to Comment Rob Jones
Rob Jones's picture

By borrowing, Apple is admitting that its so-called cash isn't really available for shareholders. So that cash shouldn't be used when estimating Apple's share price.

Jobs left in the mid-80's and Apple was nearly bankrupt by the late 90's. So I really wonder who would be willing to buy 30 year Apple debt. I don't doubt that they will be able to sell the debt. I would just love to know who buys it.

Tue, 04/30/2013 - 18:02 | Link to Comment James_Cole
James_Cole's picture

By borrowing, Apple is admitting that its so-called cash isn't really available for shareholders. So that cash shouldn't be used when estimating Apple's share price.

So-called cash lol

Does no one here understand the insane amount of cash AAPL generates each quarter? 

http://ycharts.com/financials/AAPL/cash_flow_statement/quarterly

 

Tue, 04/30/2013 - 18:13 | Link to Comment ImReady
ImReady's picture

If apple is seeing rough times ahead it only makes sense for them to borrow as much cash as they can now. Should credit markets shut down again they won't be able to get it later. Smells like F in here... 

Tue, 04/30/2013 - 18:49 | Link to Comment Richard III
Richard III's picture

Smells like teen spirit.

And as teens are notoriously fickle, so is the market for consumer electronics; Apple gadgets will prove to be no exception.

Tue, 04/30/2013 - 21:19 | Link to Comment Aurora Ex Machina
Aurora Ex Machina's picture

Nearly half of India's 1.2 billion people have no toilet at home, but more people own a mobile phone, according to the latest census data.

Only 46.9% of the 246.6 million households have lavatories while 49.8% defecate in the open. The remaining 3.2% use public toilets.

Census 2011 data on houses, household amenities and assets reveal that 63.2% of homes have a telephone.

Analysts say the data show the complex contradictions of the Indian system.[source BBC 2012]


That was in 2012: there's been another PR push recently on the issue:

Just a few weeks ago, I flew into India to join other new media specialists and journalists with the International Reporting Project to examine issues of child survival and health. (Before I continue, I simply must extend thanks to the Bill and Melinda Gates Foundation for providing a portion of the IRP funding to make this trip possible, the School of Integrative Biology at UIUC for supporting my participation in the project and GoPro Cameras for outfitting me with a Hero3 for documentation purposes.)[source oh, and translation - he's bought and paid for from the 2.0 breed]

 

The Al Jazeera report is good too.

 

 

Why am I mentioning this? Because Indians can seemingly work without bogs, but not without phones. And Africa is Android, all the way baby.

Tue, 04/30/2013 - 18:13 | Link to Comment Rob Jones
Rob Jones's picture

When I have cash in my pocket, I can spend it for groceries, gas, clothes, or give it to whomever I please. What Apple is generating is something else. Unspendable cash, kind of like monopoly money I guess. Otherwise why would they need to borrow? And it would appear that they can't even use their "cash" to buy Apple shares.

Tue, 04/30/2013 - 18:22 | Link to Comment James_Cole
James_Cole's picture

It's CHEAPER for them to borrow..

They can do anything with their cash obviously, but they'd have to pay decent amount of taxes on it to bring it home. Why do that when they can issue cheap debt and keep raking in the cash? 

What aapl will eventually do with their hoard has been speculated on ad nauseam for ages. Seems they're quite content to sit on it. 

Tue, 04/30/2013 - 19:15 | Link to Comment Rob Jones
Rob Jones's picture

When you borrow, you have to pay interest. If I have cash in the bank, it would be silly for me to run up a huge balance on my credit card.

Tue, 04/30/2013 - 19:31 | Link to Comment James_Cole
James_Cole's picture

 

2.6% bond or ~10-30% tax on cash. Not a tough decision. The whole reason the cash is overseas is to avoid taxes.

It's like if you personally could avoid paying most of your tax holding a substantial amount of your earnings out of country and instead paid your expenses through low % credit card, paid off monthly by a much smaller amount of your income. Sure you'd pay interest but it would be negligible compared to your tax savings.  

Someone above was suggesting aapl was buying its own debt issue through its investment group, sounds dubious but would make sense if they could do it. 

 

Tue, 04/30/2013 - 20:06 | Link to Comment Rob Jones
Rob Jones's picture

The downside of Apple's method of tax avoidance is that they CAN NEVER SPEND THEIR SO-CALLED "EARNINGS". I could do the same thing by quitting my job. And then I could live tax-free by borrowing against my house.

Apple calls them "overseas earnings". I call them "pie in the sky".

Tue, 04/30/2013 - 20:26 | Link to Comment James_Cole
James_Cole's picture

You're not understanding the picture... They can spend the money they just can't bring it over to buy shares or pay dividend without first paying tax. The money is not just sitting in a bank account or something either.

Also, they still have a 'paltry' ~45B stateside. 

The most they'd have to pay to bring the money back is ~35B, something they're apparently not interested in doing. 

Plus they're looking at earning a whole lot more cash this year, so no, it's not like you quitting your job...

Tue, 04/30/2013 - 21:00 | Link to Comment Rob Jones
Rob Jones's picture

I think that you are the one who is confused. You are confusing pre-tax income with earnings.

At the very least, Apple's overseas money and earnings should be derated by 35% to account for the taxes they would need to pay in order to get the money into the hands of their shareholders. And as long as that money is sittting there, it is burning a hole in the pockets of the Apple managers. They are very likely to blow the money on some bonehead aquisition that won't work out. A bird in the hand is worth (at least) two in the bush.

Tue, 04/30/2013 - 21:29 | Link to Comment James_Cole
James_Cole's picture

I think that you are the one who is confused. You are confusing pre-tax income with earnings.

No I'm not.

At the very least, Apple's overseas money and earnings should be derated by 35% to account for the taxes they would need to pay in order to get the money into the hands of their shareholders. And as long as that money is sittting there, it is burning a hole in the pockets of the Apple managers.

Sort of but not really and no. And they're not the only company that does this. 

Let's put it this way, AAPL didn't get to nearly 150B in CASH by making stupid decisions with debt. 

Tue, 04/30/2013 - 21:49 | Link to Comment Rob Jones
Rob Jones's picture

Let's put it this way, AAPL didn't get to nearly 150B in CASH by making stupid decisions with debt.

AAPL doesn't have nearly $150B in CASH. It has $150B in tax-limbo monopoly money.

Also, the person responsible for Apple's current success is dead. It is now being run by people who are much less talented than Jobs. So you cannot count on them not to make stupid decisions. Jobs left Apple in the mid-80's. Apple's hot product then was the Mac which continued to do well into the early 90's as Apple made various incremental improvements in memory, clock speed, etc. But eventually Microsoft software caught up with Mac software and Apple was on the verge of bankruptcy by the late 90's. If Apple isn't able to keep innovating, its competitors like Samsung will catch up and Apple could well find itself in the same situation once again.

Tue, 04/30/2013 - 22:13 | Link to Comment James_Cole
James_Cole's picture

AAPL doesn't have nearly $150B in CASH. It has $150B in tax-limbo monopoly money.

It's not 'tax-limbo monopoly money,' there are just restrictions on what can be done with it in the USA without paying taxes. It's the same general situation with basically anyone with a lot of money and distaste for taxes. The good news is AAPL is a multinational so they can invest that money freely elsewhere. 

Also, the person responsible for Apple's current success is dead. It is now being run by people who are much less talented than Jobs. So you cannot count on them not to make stupid decisions.

Tim Cook is responsible for most of the cash hoard. 

If Apple isn't able to keep innovating, its competitors like Samsung will catch up and Apple could well find itself in the same situation once again.

Obviously true, but that's totally separate to their debt deal. 

Wed, 05/01/2013 - 02:52 | Link to Comment mdtrader
mdtrader's picture

Nope generally not. Also what is this nonsense that Apple's cash should disregarded in any valuation. Even If they had to repatriated the cash they wouldn't lose all of in tax. So just value Apple's cash at a 35% discount if you want, that still leaves $94 billion and growing. Also that cash overseas could be use to make aquistions, so the idea that it should be disregarded is yet more nonsense from desperate bears, who having missed Apple all the way up from $85, will miss the next leg up too! 

Tue, 04/30/2013 - 17:53 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

Why not move the company and articles of incorporation to Bermuda?  Then they are no longer a US company and are taxed only on US income, which is all they're paying tax on now anyway.

Tue, 04/30/2013 - 17:56 | Link to Comment Bunga Bunga
Bunga Bunga's picture

Filthy rich but can't bring money home from overseas, therefore need a little loan. Funny, I got such an e-mail weeks ago, it was from Nigeria.

Tue, 04/30/2013 - 17:56 | Link to Comment Z_End
Z_End's picture

Perhaps they will buy their own Foxxcon someday?

Tue, 04/30/2013 - 18:38 | Link to Comment NotApplicable
NotApplicable's picture

Or declare themselves sovereign and start their own central bank.

Tue, 04/30/2013 - 17:59 | Link to Comment buzzsaw99
buzzsaw99's picture

bondholders just jumped to the front of the line. congrats to the stupid common shareholders who just got hosed again!

Tue, 04/30/2013 - 18:15 | Link to Comment Dr. Engali
Dr. Engali's picture

They hosed themselves by screaming for a dividend/ share buy back program. All the multi-nationals are following this game plan. Why they think Apple would be any different is beyond me. Eventually they will pay for their short sightedness

Tue, 04/30/2013 - 17:57 | Link to Comment Rainman
Rainman's picture

The Tuth : All I do is play angry birds on my I-pad. It's a pain in the ass at everything else.....a wasted Xmas gift..... coulda got a new shotgun and more decoys... 

Tue, 04/30/2013 - 18:03 | Link to Comment Dr. Engali
Dr. Engali's picture

Somewhere in the future when,Apple becomes the next Dell, they will be looking for private equity to do a leveraged buy out.

Tue, 04/30/2013 - 18:04 | Link to Comment dime2962
dime2962's picture

How long before they access their line of credit? 

Can they take out a HELOC on the new sprawling complex they are building?

Tue, 04/30/2013 - 18:06 | Link to Comment b_thunder
b_thunder's picture

Uncle Samobama is salivating to grab 35% of that offshore pile of cash!  No, wait, Uncle Samobama is waiting for campaign contribution donation large enough to declare another offshore tax amnesty.

 

Tue, 04/30/2013 - 18:11 | Link to Comment buzzsaw99
buzzsaw99's picture

mebbe craapl should pay their taxes like everyone else

Tue, 04/30/2013 - 18:22 | Link to Comment toys for tits
toys for tits's picture

Idiotic comment.  

Corporations only pay taxes indirectly, passing the embedded taxes on in the customers' price.  

Eliminate all corporate taxes and the prices for goods and services will drop an average of 20%.

Tue, 04/30/2013 - 18:31 | Link to Comment buzzsaw99
buzzsaw99's picture

Eliminate all corporate taxes and the prices for goods and services will drop an average of 20%.

 

Now that's an idiotic comment!

Tue, 04/30/2013 - 19:27 | Link to Comment toys for tits
toys for tits's picture

Do you think corporate taxes and the costs to comply with corporate tax law adds nothing to the final retail price? 

You're retarded.

If you do want to educate yourself and not be an imbecile, read up on the Fair Tax.

Tue, 04/30/2013 - 20:39 | Link to Comment adr
adr's picture

Do you honestly think any corporation will reduce prices instead of keeping an extra 20% margin? Especially publicly traded ones.

Right now 90%+ of the MSRP of any product is various profit margins from distributor to retailer.

Tht is how a $1 piece of shit from China ends up havng a $30 MSRP at Walmart.

Tue, 04/30/2013 - 18:32 | Link to Comment weyes1
weyes1's picture

Equally idiotic, I'm afraid.

Eliminate all corporate taxes and up go the profits and the dividends.  To think that these corporate "savings" would actually be passed on to the consumer, dollar for dollar, is hopelessly naive.

Tue, 04/30/2013 - 18:46 | Link to Comment NotApplicable
NotApplicable's picture

Stop looking at it as a form of charity, and think about how the economy functions. In a competitive marketplace, those dollars would have no other choice, as ALL costs fall to the consumer.

To say a savings wouldn't be passed onto a consumer is to state that Apple has monopoly pricing power. Reggie has clearly demonstrated that this is NOT the case, as their margins shrink and shrink, being eaten up by the competition. In other words, from the perspective of capital formation theory, your view is hopelessly naive as well, though it does fit into the perspective of a criminal oligarchy.

Tue, 04/30/2013 - 18:58 | Link to Comment James_Cole
James_Cole's picture

Reggie has clearly demonstrated that this is NOT the case, as their margins shrink and shrink, being eaten up by the competition.

'Shrink and shrink' down to 37.5% lol

http://photos.appleinsider.com/margins-120125.jpg

Shrinking and shrinking!

Tue, 04/30/2013 - 19:13 | Link to Comment NotApplicable
NotApplicable's picture

The trend is your friend.

http://boombustblog.com/images/stories/aapl/image106.png

Unless Steve Jobs comes back from the grave with another revolutionary device, there's no way to keep that margin up with the current product line.

Tue, 04/30/2013 - 19:41 | Link to Comment James_Cole
James_Cole's picture

Thats the product cycle, in particular the iphone. See where it goes up and down? Thats where they introduce new iphones and get better ($) at producing the old ones. The product timelines converge in the middle of the cycle producing the best margins.

Their best margins ever were on the iphone 4s, which was particularly good for a number of reasons.  

If you look at their 10 yr margins (which I had linked to) you see the ACTUAL picture. Not this stupid reggie graph. 

Also, their best quarter on record was q1 2013. 

Tue, 04/30/2013 - 19:06 | Link to Comment InvestmentMind
InvestmentMind's picture

I'm sorry but you're being naive.

Businesses are run on margins, on cost plus, on return on capital. To say that a corporate tax cut wouldn't be passed along to consumers is crazy.

A tax cut lowers cost for all competitors. That cost reduction, based on elasticity, will be passed on to consumers. Yes, it will be different for each company, each industry, but for most an overwhelming majority of the tax cut will flow through to consumers.

To argue otherwise is absurd.

If the price of land or labor dropped for all of the competitors in an industry, no one would be able to hang on to the excess margin created (unless in monopoly or oligopoly situations). Why would a reduction in taxes be thought of differently?

You response may be correct in terms of the next day, but not over sustained business cycles. Hence, your naïveté.

Tue, 04/30/2013 - 19:14 | Link to Comment buzzsaw99
buzzsaw99's picture

Bullshit! It would all go to bonuses and stock options. All the rest of that crap sounds like you learned it at princeton while the bernank was teaching there.

Tue, 04/30/2013 - 19:37 | Link to Comment toys for tits
toys for tits's picture

You're a fool that apparently has no idea about private industry.

Do you really believe that retail prices would not fall because of market forces if corporations didn't pass the taxes they paid and the costs to comply with corporate tax law on to the end user?

Do you also believe that unicorn farts cure cancer?

Tue, 04/30/2013 - 20:51 | Link to Comment adr
adr's picture

You believe consumers actually set prices? Prices are set by buyers at major retailers. They tell you what the price is going to be and they tell you to find someone who can manufacture the product at a price that wil alow you to sell that product at 70%+ marging to them.

I sell to Walmart, Dick's, Target, etc. They will not reduce their margin under any circumstances. The only way the MSRP to a consumer can be lowered is if the vendor selling to Walmart can reduce their price.

Walmart, Dick's, etc are asking for 70%+ on almost every product. Input and manufacturing costs are going up, there is virtually no profit to be made for a vendor.

Most vendors I work with haven't paid any taxes in years because they have made no profit to need to pay tax on. If you lower the tax rate, sure it will allow the vendor to make a profit, but then all the cash they make will get taxed.

There is no incentive to run a profitable business anymore.

Tue, 04/30/2013 - 22:07 | Link to Comment Evil Bugeyes
Evil Bugeyes's picture

Do you also believe that unicorn farts cure cancer?

Throughout recorded history, not even one unicorn has ever died of cancer. Something to think about...

Wed, 05/01/2013 - 00:23 | Link to Comment Tinky
Tinky's picture

Supporting links?

Tue, 04/30/2013 - 19:20 | Link to Comment toys for tits
toys for tits's picture

weyes1

I didn't say dollar for dollar, did I, idiot?

The cost of corporate taxes and the cost to comply with corporate tax laws adds, on average, 20% to the cost of all new products and services sold in the US.

These costs are passed on to the end consumer. 

This is an effective tax rate on all purchases of ~25%.

Research the Fair Tax to learn more. 

Tue, 04/30/2013 - 18:16 | Link to Comment Yellowhoard
Yellowhoard's picture

Frankly, we would all be better off if US based corporations were not taxed at all.

And, we would be better off still if there were no income tax on individuals.

Tariffs and sales taxes would be the most efficient producers of government revenue.

Imagine the renaissance that America would have if corporations from around the world relocated right here where capital is treated without penalty.

Tue, 04/30/2013 - 18:25 | Link to Comment toys for tits
toys for tits's picture

+1

Is the Fair Tax dead?

 

Tue, 04/30/2013 - 18:33 | Link to Comment nmewn
nmewn's picture

No, just simmering among the masses. Everyone once in a while a bubble comes up.

Its greatest appeal is it removes the long standing practice of handing out political favors through the tax code...leaving only regulations to accomplish pay backs...ie cronyism.

Tue, 04/30/2013 - 19:34 | Link to Comment toys for tits
toys for tits's picture

If the ignorance on this site - which seems to have a smarter membership than the general public - is an indication, then it has a tough row to hoe.

Tue, 04/30/2013 - 18:47 | Link to Comment James_Cole
James_Cole's picture

Frankly, we would all be better off if US based corporations were not taxed at all.

Good news friend! A lot of them basically aren't!

http://www.quandl.com/OFDP-Open-Financial-Data-Project/DMDRN_AAPL_EFF_TA...

http://www.nerdwallet.com/blog/investing/2012/corporate-taxes-only-9-per...

Imagine the renaissance that America would have if corporations from around the world relocated right here where capital is treated without penalty.

More good news, a lot of them are located in America! Best protection not paying taxes can buy!

Wed, 05/01/2013 - 00:01 | Link to Comment Yellowhoard
Yellowhoard's picture

OK sarcasm boy, the point that I am making is that NONE of the companies that base themselves in the US should pay taxes. This would render all of the GE type loopholes obsolete as they would become redundant.

Crony capitalism is the cancer.

Tue, 04/30/2013 - 18:24 | Link to Comment Yellowhoard
Yellowhoard's picture

Still waiting for that delete post button.

Tue, 04/30/2013 - 18:25 | Link to Comment Fix-ItSilly
Fix-ItSilly's picture

The US Govt should stop this tax avoidance shill by corporations.  The preponderance of value added is performed by US divisions.  The profits were generated in the US, but offshore units strategically located in low or no tax locales are magically deposited with the profits.

Tue, 04/30/2013 - 18:36 | Link to Comment Yellowhoard
Yellowhoard's picture

The way the system works currently, pharmaceutical companies, for instance, do R&D here, then manufacture the drugs overseas where magically all of the profit occurs.

These overseas jobs would remain in the US if there were no taxes imposed on the US company.

Our tax policy guarantees that US jobs will be shipped overseas.

Tue, 04/30/2013 - 19:09 | Link to Comment Saint Pitbull
Saint Pitbull's picture

One of the financially strongest companies in the world is telling anyone who will listen that it doesn't want to repatriate its overseas cash back to the US.

And don't believe for a second that the main reason is tax related or it is because of the investment opportunities that it has overseas.  The main reason is FEAR.

Maybe they are remembering what happened to the tobacco companies.  Maybe something else.

Tue, 04/30/2013 - 19:51 | Link to Comment Kirk2NCC1701
Kirk2NCC1701's picture

Q1:  Will "cash held abroad" not be treated as 'tax evading'?  It is publicized as such by the MSM, when it pertains to 'regular' people, i.e. for the other "people" (flesh & blood type, as opposed to the paper or undead entities).

Q2: Will corporations be allowed to hold PM in their vaults if gold is banned?  All or just C-corps and banks?

Q3: Will the US corporate bonds be revalued at 1:1 after the dollar collapses and is reset to some new level?  Let's just 'pretend' this would happen for this exercise, even though doctors Bernanke and Krugman assure us this could never happen.

Q4:  If an unincorporated person keeps their money as cash (in vault at home), he does not have to declare this fact, the amount or even its location to anyone for all eternity.  It is no longer in the system, and does nothing for the Velocity of Money (VoM), FRB or the economy.  It might as well be 'dead'.  But the instant one wants to keep this 'dead' money outside the US, one is supposed to tell the Taxman (IRS)?  It is 'dead'. So why do they care?  Could it be, to prevent it from being used for purposes that other branches of government don't "appove" of?  Even though they also don't approve of the hundreds of billions (several trillion) that's floating out there and possibly not "doing God's work"?

Ah, so many questions, so few anwers. /s

Tue, 04/30/2013 - 19:53 | Link to Comment hairball48
hairball48's picture

After the coming "Greatest Depression"...What happens when the "iGeneration" goes broke and can no longer afford all these expensive "toys"? AAPL at 200?

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