The cash hoard of corporate America keeps getting bigger. U.S. companies held over $1.6 trillion in cash last year, up from 2014 and more than twice the corporate cash stockpile held by companies in 2007, before the Great Recession.
The list of companies was published by Moody’s Investor Service, which noted that among the 1,000 companies included in the analysis, the top five in hoarding cash were Apple, Microsoft, Google, Cisco, and Oracle. Financial companies were not included in the listing. Combined, the top five, who were all tech giants, hold an estimated $504 billion in cash, which accounted for 30 percent of the total amount held by U.S. corporations.
Five co's r hoarding more than $500 Bil. It's 1st time the top 5 cash hoarders r made up exclusively of tech groups pic.twitter.com/OIxKoJEaK2— StockOptionCoach (@StkOptionCoach) May 22, 2016
Of the $1.6 trillion in cash total held by American corporations, about 72 percent of the amount is held overseas, which means it remains untaxed by the U.S. government. The issue has infuriated Washington lawmakers and has even become a hot button topic of discussion in the presidential campaign. U.S. corporations are keeping these enormous stockpiles overseas to avoid paying corporate taxes in the country, which in some cases can be as high as 40 percent. Unless the tax laws are changed, the trend won’t stop anytime soon, as Moody’s told CNN Money.
“We expect that overseas cash balances will continue to grow unless tax laws are changed to encourage companies to repatriate money,” Moody’s authors Richard Lane and Lenny Ajzenman told CNN.
Apple, the largest tech giant and one of the richest companies in the world, topped Forbes list of the most valuable brands for the sixth year in a row. Now, they also top the list of worst offenders when it comes to hoarding cash abroad: Apple had $200 billion held overseas in 2015, a huge increase from $31 billion in 2010. Most of the cash is stored in tax havens like Ireland. CNN noted that such enormous stores of cash to avoid taxes deprives the U.S. of much-needed investment, which could be highly problematic for the American economy.
“All this cash is also a sign that companies aren’t using their cash to invest in the future, whether it’s to fund new projects and ideas or buildings and facilities. Capital expenditures decreased last year after increasing for five consecutive years.”
For his part, Apple CEO Tim Cook defended the company’s actions to CBS News back in December. During an exclusive interview, 60 Minutes correspondent Charlie Rose pressed the issue of why Apple doesn’t bring the cash back home. Cook was candid in calling the tax laws “antiquated” and dismissed criticism from Congress that the company is avoiding taxes on its overseas profits as “political c**p.”
“Cook was agitated when reminded by Rose that many in Congress believe Apple is engaged in a scheme to pay little or no taxes on $74 billion in overseas revenue. ‘That is total political c**p. There is no truth behind it. Apple pays every tax dollar we owe,’ he says. ‘We pay more taxes in this country than anyone,’ he tells Rose. Apple pays more because its makes the most money of any corporation on its ubiquitous products that are best sellers around the world. Two-thirds of Apple’s revenue comes from overseas says Cook.”
Cook went on to say that like many huge U.S.-based multinationals, Apple keeps their cash abroad in foreign subsidiaries to avoid corporate taxes back home. Cook was then asked why he didn’t repatriate the money to the United States.
“I’d love to,” he said to CBS. “It would cost me 40% to bring it home. And I don’t think that’s a reasonable thing to do. This is a tax code, Charlie, that was made for the industrial age, not the digital age. It’s backwards. It’s awful for America. It should have been fixed many years ago. It’s past time to get it done.”
U.S. federal income tax for corporations is imposed at a graduated rate. When taxable income exceeds $335,000, it is subject to a tax rate of around 35 percent.
[Photo by Spencer Platt/Getty Images]