This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

We Need Another Corporate Tax Holiday Right Now!

NEW YORK (TheStreet) -- This year is the 10-year anniversary of the last U.S. tax holiday, which was passed by Congress and signed by Pres. George W. Bush. It allowed companies to repatriate more than $300 billion in offshore cash at a reduced tax rate. Over 800 companies took advantage.

In the three years that followed, the stock markets soared more than 30%. We need another tax holiday now!

A new tax holiday will continue the current bull run of the market while infusing the U.S. economy with more cash to create jobs, perhaps even prompting an increase in the minimum wage.

Need another reason? Think about the European Union’s investigation, announced Wednesday, to better assess the tax structures of various U.S. companies including Apple (AAPL - Get Report), Starbucks (SBUX) and others.

I believe the EU's investigation was prompted by the results found in last year's U.S. Senate inquiry, which looked into Apple's overseas tax maneuvering. The Senate's investigation claimed it found evidence Apple paid very little corporate tax on at least $74 million in revenue dating back from 2009.

Although the EU's investigation is being called a "global crackdown," it will first look into possible corruption in the Irish government. This is because U.S. Senate investigators concluded that Apple "exploited a loophole" in Ireland’s tax code.

All told, there is over $2 trillion in untaxed earnings being held overseas by U.S. companies looking for ways to minimize their U.S. tax liabilities.

Instead of "cracking down" on these companies, which are doing their required fiduciary duties to their shareholders, it's time for U.S. lawmakers to legislate another tax holiday to allow these companies to repatriate some of that idle cash and put it to work.

U.S. federal tax rates on corporate taxable income vary from 15% to 35%. In Ireland, it's as low at 12.5%. Apple and Starbucks are being penalized for executing strategies to lesson their tax burden. Why wouldn't they? I don't believe a CFO deserves to hold that title if she/he has ever approached the company's board with overseas tax-saving strategies.

At the end of Apple's fiscal second-quarter (ending in March), Apple had a total of $150.6 billion in cash on the balance sheet. But roughly 88% of that cash or $132.2 billion was held overseas. This is why a company like Apple, which generates $10 billion in profits each quarter, has to go to the debt market to fund its share repurchase program and pay dividends. It makes no sense.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $94.51 0.52%
FB $97.76 -6.10%
GOOG $677.00 -0.96%
TSLA $143.55 -12.00%
YHOO $26.54 -5.10%


Chart of I:DJI
DOW 15,951.99 -75.06 -0.47%
S&P 500 1,853.44 -26.61 -1.42%
NASDAQ 4,283.7530 -79.3910 -1.82%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs