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by slsii
3919 days ago
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There's a very significant and logical reason why American corporations - particularly tech companies - are accumulating so much cash: repatriation taxes. The cash is collecting dust abroad, and large tech companies are waiting for a tax holiday, for which there is precedent [0]. There are a number of fascinating reasons why companies may hold cash (e.g., it's been suggested that companies with CEOs that grew up during the Great Depression hold (held) more cash than those that didn't). [1] That said, it does appear that taxes seem to be one of the more significant (if not the most significant) reason in our current economic climate. [0] https://en.wikipedia.org/wiki/Repatriation_tax_holiday
[1] http://www.rhsmith.umd.edu/files/Documents/Departments/Finan... |
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I'll claim no authority to speak on corporate tax policy (at least from the perspective of firms); on the face of it, I can imagine that it might be reasonable to suggest that tax policy is the major contributor to the dynamics of firm investment behavior.
I wasn't, however, really sincerely questioning why, e.g., AAPL is accumulating cash or necessarily correlating that fact with domestic investments. It was sloppy writing on my part, but my intent was only to give an obvious example of capital accumulation.
Surely, cash is not the only means of firms funding investments. Firm investment behavior will be guided by a variety of factors; my thought was to point to macroeconomic factors like insufficient aggregate demand, capital flight from EM and persistent deflationary pressure to provide simpler explanation to the conclusions of the OP.