Michael Smith - Taking a bite out of Apple

Below is the blog that we must response to in regards to the Wall Street Journal article linked in the below post.

Taking a Bite Out of Apple's Cash

5/1/2017

According to the Wall Street Journal, Apple Inc. is expected to report having $250 billion of cash and more than 90% of it is located outside of the United States. This means that Apple has more money located in foreign countries than Britain and Canada combined. Apple has more cash than the total market value of Walmart and Proctor and Gamble. It has doubled its cash stockpile in the last four and a half years.
Apple’s ability to generate such a cash hoard is largely due to its hugely successful products. Its desire to retain cash is in part due to its near bankruptcy experience in the 1990’s. Equally important to Apple’s cash retention is the U.S. tax code. Cash repatriated to the United States is subject to a 35% tax. Tim Cook, Apple Chief Executive, was quoted in the article saying Apple was “eager to bring cash home if tax changes enabled it.” Apple’s Chief Financial Officer Luca Maestri indicated that tax changes could would provide “flexibility to do more capital returns. In 2012, Cook began a $200 billion stock buyback program.
News of Apple’s cash position surfaced at a time when the Trump Administration has reportedly proposed, for a limited time, a special tax of 9% on repatriated cash. This proposed tax discount is the subject of much political debate. Apple would pay a lower rate than most Americans pay. This does not sit well with Democrats. Republicans argue that the cash could be used for hiring U.S. workers and purchasing equipment. It would stimulate the U.S. economy, they argue. Democrats counter that Apple and other companies would use cash to pay dividends and buy back stock. They argue this favors the rich and is not productive.
What do you think?  Should the U.S. tax repatriated cash at the rate of 9% for a limited time? Why or why not?