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Old 04-04-2014, 12:46 PM  
KC native KC native is offline
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Idle cash piles up

Idle cash piles up: David Cay Johnston
http://www.reuters.com/article/2012/...86F0GK20120716
Mon, Jul 16 2012
By David Cay Johnston

(Reuters) - IRS data suggests that, globally, U.S. nonfinancial companies hold at least three times more cash and other liquid assets than the Federal Reserve reports, idle money that could be creating jobs, funding dividends or even paying a stiff federal penalty tax for hoarding corporate cash.

The Fed's latest Flow of Funds report showed that U.S. nonfinancial companies held $1.7 trillion in liquid assets at the end of March. But newly released IRS figures show that in 2009 these companies held $4.8 trillion in liquid assets, which equals $5.1 trillion in today's dollars, triple the Fed figure.
Why the huge gap?

The Fed gets its data from the IRS, but only measures the flow of funds in the domestic economy. The IRS reports the worldwide holdings of U.S. companies, which I think is the more revealing measure.

From the companies' point of view, it makes perfect sense these days to hoard cash.

First, Congress lets overseas profits accumulate untaxed, so long as offshore subsidiaries own the cash. Second, companies have a hard time putting cash to work because fewer jobs and lower wages mean less demand for products and services. Third, a thick pile of cash gives risk-averse CEOs a nice cushion if the economy worsens.

Given the enduring hard times, you might think that corporations have used up their cash since 2009. But real pretax corporate profits have soared, from less than $1.5 trillion in 2009 to $1.9 trillion in 2010 and almost $2 trillion in 2011, data from the federal Bureau of Economic Analysis shows.

That is nearly $1 trillion of increased profits over two years, while actual taxes paid rose less than a tenth as much, BEA reports show. Dividends, wages and capital expenditures all grew less than profits, while undistributed profits rose. The result: more cash.

Bigger profits are good news, but it would have been better news had those increased profits been put to work, not laid off in accounts paying modest interest. Hoarding corporate cash in bank accounts, Treasuries and tax-exempt bonds poses a serious threat to the economy, as Congress recognized when it enacted the corporate income tax in 1909.

Let's get some perspective on these gigantic figures, all measured in today's dollars.

The 2009 cash reported to the IRS equaled America's entire economic output that year from New Year's Day through May Day.

This cash pool came to $16,700 for every man, woman and child in the United States, a 53 percent real increase from 2004, my calculations from IRS data show.

Looked at yet another way, these companies had 11.3 percent of their assets in cash, or enough to pay their 2009 corporate income tax bills, which amounted to $148 billion, more than 34 times over.

In short, U.S. companies hold vastly more cash than is needed to finance their operations.

For investors, companies holding 11.3 percent of their assets in cash lowers returns. Did you buy shares of American Widget so executives could park profits in savings accounts?

For workers, idle cash means idle hands and minds. With one in five Americans unemployed or underemployed, and real median wages in 2010 back down to the level of 1999, this is no time for capital to go on an extended holiday.
For taxpayers, untaxed profits subtly reduce corporate tax burdens and increase the tax burden on individuals. Because taxes owed on offshore profits are not adjusted for inflation, they depreciate at the rate of inflation. That means a double whammy for taxpayers as government pays interest on money it borrows while its accounts receivable from multinational corporations lose value.

Since the income tax system began, Congress has authorized a tax on excessive accumulated earnings to limit damage to the Treasury -- and the economy -- when companies hold far more cash than their operations require. Without the accumulated earnings tax, corporations can become bloated tax shelters instead of engines of growth.

A business holding more cash than its operations reasonably require can be hit with a 15 percent levy under Section 531 of the Internal Revenue Code, on top of the 35 percent corporate income tax. The Tax Court even devised a mechanical test in 1965 for how much is too much.

Historically the IRS has levied only privately owned firms or publicly traded companies with few shareholders. But Internal Revenue Code Section 531 applies to all corporations. President Ronald Reagan signed Section 532 (c), which made that explicit, though with an exception for untaxed offshore profits.

After reviewing decades of literature on these code sections, I cannot fathom any rational basis for giving multinational companies an exception to the cash hoarding rules, which discriminates against purely domestic firms.

Some of the multinational corporations say they will bring home what could be more than a trillion dollars if Congress will give them an 85 percent tax discount. The companies frame this as creating jobs. But as I showed in an earlier column, unless there are strict rules, the money can be used to buy back company stock while destroying jobs.

Want to motivate companies to put some of those trillions of dollars of idle cash to work creating jobs, paying dividends or sharing the burden of taxes? Call 1-202-224-3121 and tell your senator or representative you want Section 531 vigorously enforced - now - and the offshore loophole closed immediately.
(David Cay Johnston is a Reuters columnist. The views expressed are his own.)
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Old 04-04-2014, 07:32 PM   #16
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Bastards are hoarding the cash that the government releases into the stock market each month
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Old 04-04-2014, 08:07 PM   #17
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No.
Yes. Plus a bit of business worrying about what the retard in charge will do next.
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Old 04-04-2014, 08:56 PM   #18
petegz28 petegz28 is offline
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I'm not going to argue the legality of it all but it would be nice if these companies were actually reinvesting their cash back into the economy via jobs and such. It is the American economy that is the primary consumer base for most if not all of these companies so it would actually be doing themselves a favor in the long term. Plus if I am a shareholder I am asking WTF this money isn't being put to use or paid out in dividend? Either way it's an ethical decision when you get down to it.
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Old 04-04-2014, 09:00 PM   #19
petegz28 petegz28 is offline
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And I don't know where my friends on the Right find room to blame this on Libs and Progs? Reagan is the one that signed this into law or at least expanded it's reach.

Quote:
Historically the IRS has levied only privately owned firms or publicly traded companies with few shareholders. But Internal Revenue Code Section 531 applies to all corporations. President Ronald Reagan signed Section 532 (c), which made that explicit, though with an exception for untaxed offshore profits.
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Old 04-04-2014, 09:03 PM   #20
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Originally Posted by petegz28 View Post
I'm not going to argue the legality of it all but it would be nice if these companies were actually reinvesting their cash back into the economy via jobs and such. It is the American economy that is the primary consumer base for most if not all of these companies so it would actually be doing themselves a favor in the long term. Plus if I am a shareholder I am asking WTF this money isn't being put to use or paid out in dividend? Either way it's an ethical decision when you get down to it.
Who is investing money into this economy? It would be nice if companies were not raped for bringing money back to the US. And it would be nice if industry didn't have agency after agency adding regulations that cost billions. And it would be nice if someone would tell business how ObamaCare will impact them and when the impact will happen. But nice isn't for shit.
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Old 04-04-2014, 09:07 PM   #21
petegz28 petegz28 is offline
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Originally Posted by HonestChieffan View Post
Who is investing money into this economy? It would be nice if companies were not raped for bringing money back to the US. And it would be nice if industry didn't have agency after agency adding regulations that cost billions. And it would be nice if someone would tell business how ObamaCare will impact them and when the impact will happen. But nice isn't for shit.
These excuses are old hat anymore. Why are they having to bring it BACK in the first place? It's a vicious cycle, I agree. One sends money oversees to avoid taxes and the government threatens to increase taxes on such, etc, etc.

But I still contend the problem with our economy and corporate America for that matter is the selling out of America among other things such as regulation and taxes are finally biting us in the ass.

The sad part, HCF, is people still defend one side and blame the other when it's both that are the problem.

It would be a lot more palatable for people to go for lower corporate tax rates and etc, if these companies were hiring more and paying more. But when they hoard and hide and stiff the American worker they aren't winning over any fans and if anything are giving ammo to those that want to increase regulation and taxes.
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Old 04-04-2014, 09:41 PM   #22
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Originally Posted by petegz28 View Post
These excuses are old hat anymore. Why are they having to bring it BACK in the first place? It's a vicious cycle, I agree. One sends money oversees to avoid taxes and the government threatens to increase taxes on such, etc, etc.

But I still contend the problem with our economy and corporate America for that matter is the selling out of America among other things such as regulation and taxes are finally biting us in the ass.

The sad part, HCF, is people still defend one side and blame the other when it's both that are the problem.

It would be a lot more palatable for people to go for lower corporate tax rates and etc, if these companies were hiring more and paying more. But when they hoard and hide and stiff the American worker they aren't winning over any fans and if anything are giving ammo to those that want to increase regulation and taxes.
They don't "send " money overseas. They make Profit over seas. They pay tax over seas. Then they leave it overseas because our government thinks they deserve a cut for no reason other than they can.

Regulate and Tax and business will look elsewhere to do business.
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Old 04-04-2014, 10:09 PM   #23
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We just need to be taxed more this will solve our problems as well as bringing everyone out of poverty.
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I said I'm an expert dickrider.
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Old 04-05-2014, 12:33 AM   #24
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Yes. Plus a bit of business worrying about what the retard in charge will do next.
Obama is killing big corporations!
/RWNJ

Obama is owned by big corporations!
/RWNJ


Yes, these big corporations must be very worried.

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Old 04-05-2014, 12:36 AM   #25
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Originally Posted by HonestChieffan View Post
Who is investing money into this economy? It would be nice if companies were not raped for bringing money back to the US. And it would be nice if industry didn't have agency after agency adding regulations that cost billions. And it would be nice if someone would tell business how ObamaCare will impact them and when the impact will happen. But nice isn't for shit.
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Old 04-05-2014, 06:27 AM   #26
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Bastards are hoarding the cash that the government releases into the stock market each month
If this is true, then why the hell is the govt still doing it?
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Old 04-05-2014, 07:20 AM   #27
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Nothing like knowing billions of your consumer dollars have exited our economy, not circulating, not creating demand, not helping stimulate your local economy.
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Old 04-05-2014, 07:41 AM   #28
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Nothing like knowing billions of your consumer dollars have exited our economy, not circulating, not creating demand, not helping stimulate your local economy.

Amazing the depths of your stupidity.
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Old 04-05-2014, 07:50 AM   #29
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I heard that bunches of money are being sent to Mexico from Mexicans living in America, we should be taxing it.

Stop sending money away
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I said I'm an expert dickrider.
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Old 04-05-2014, 07:56 AM   #30
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I heard that bunches of money are being sent to Mexico from Mexicans living in America, we should be taxing it.

Stop sending money away
racist
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