How much would Apple's overseas cash help the U.S. economy?

Apple CEO Timothy Cook delivers pauses while giving opening remarks while testifying before the Senate Homeland Security and Governmental Affairs Committee's Investigations Subcommittee about the company's offshore profit shifting and tax avoidance in the Dirksen Senate Office Building on Capitol Hill May 21, 2013 in Washington, D.C.

Apple CEO Tim Cook says the company pays all the taxes it legally owes. Tuesday, he was on Capitol Hill to face questions on some $100 billion that Apple holds overseas, safe from American tax collectors.

Apple, of course, is hardly the only American firm that moves money around the globe to lower its tax bills. And there are surely Washington bureaucrats who would love to get their hands on a potential new source of revenue. But getting that money into America and onto the tax rolls would solve some problems and create new ones. The issue of corporate taxation underscores just how difficult it is to change the tax system.

It helps to first get a sense of just how much U.S. corporate money is overseas.

“The scale is gigantic,” says Ed Kleinbard, former chief of staff of Congress’s Joint Committee on Taxation and now a USC law professor. “That number is about $2 trillion right now.”

Tax that at the top corporate rate and suddenly America has an extra $700 billion. That's as much as the financial crisis bailout in 2008. In reality, hardly any companies actually pay the full 35 percent tax rate. Our hefty tax code is filled with loopholes that companies fight hard to keep. But the tax revenues on this foreign money could still be hundreds of billions of dollars, which would be some shopping spree.

“It would have a tremendous impact on improving the federal budget, reducing the deficit and of course it’s money we could be investing in our future,” says David Cay Johnston, a Syracuse University law professor and columnist for Tax Analysts.

America’s armchair budgeters could take their pick and spend the haul on education, health, or the military. Or new corporate tax revenue could be used to cut taxes for actual humans.

Whether by funding programs or cutting their taxes, most Americans would probably choose to help people over companies. But it’s not quite that simple, because people’s income and savings are connected with companies, whether they know it or not.

In today’s hearing, Republican Senator Rand Paul said companies like Apple are being wrongly vilified for following the law. Then he started talking about the man in the mirror.

“Is there a Mr. Apple out there? No, it’s us,” Senator Paul said. “If you have a mutual fund, you probably own some Apple shares. If you’re a teacher with a pension fund, you own Apple shares. If you’re a fireman with a pension fund, you probably own Apple.”

Boost a company’s tax bill and the hit to the stock price can hurt ordinary people’s retirement savings. Or it might jeopardize the jobs of people who work for and with the company. Changing any tax law squeezes somebody. That’s why simplifying taxation is so hard, and why Apple and other companies have such big lobbying bills.

Kai Ryssdal: Mr. Cook went to Washington today. Apple CEO Tim Cook spent some time in the company of the Senate Permanent Subcommittee on Investigations talking taxes. Specifically, how much Apple is paying on the $100 billion or so in cash that's held by its overseas subsidiaries.

Cook was the unlucky CEO taking a turn in the barrel, but the topic du jour was really all American companies that keep profits abroad to lower their tax bills. We asked Marketplace's Mark Garrison what difference that money makes anyway.


Mark Garrison: First, let’s get a sense of how much corporate money’s overseas. Ed Kleinbard is the former chief of staff of Congress’s Joint Committee on Taxation and now a USC law professor.

Ed Kleinbard: The scale is gigantic. That number is about $2 trillion right now.

Tax that at the top corporate rate and America has an extra $700 billion. That’s as big as the 2008 financial crisis bailout. In reality, hardly any companies actually pay the full 35 percent. You know, loopholes. But the tax revenues could still be hundreds of billions, which would be some shopping spree.

David Cay Johnston: It’s a lot of money.

David Cay Johnston is a Syracuse law professor and columnist for Tax Analysts, who’s made a career of investigating gaming the tax system.

Johnston: It would have a tremendous impact on improving the federal budget, reducing the deficit and of course it’s money we could be investing in our future.

Take your pick: spend it on education, health, military. Or use corporate tax revenue to cut taxes for actual humans. Most Americans would choose to help people over companies. But it’s a little more complicated. Cook testified Apple pays everything it legally owes. In today’s hearing, Republican Senator Rand Paul said companies are being wrongly vilified. Then he started talking about the man in the mirror.

Sen. Rand Paul: Is there a Mr. Apple out there? No, it’s us. You know, if you have a mutual fund, you probably own some Apple shares. If you’re a teacher with a pension fund, you own Apple shares. If you’re a fireman with a pension fund, you probably own Apple.

Boost a company’s tax bill and the hit to the stock price can hurt your retirement savings. Changing any tax law squeezes somebody. That’s why Apple and other companies have such big lobbying bills. In New York, I'm Mark Garrison, for Marketplace.

About the author

Mark Garrison is a reporter and substitute host for Marketplace, based in New York.

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