Corporate America’s “Thick Pile of Cash”

According to Reuters columnist and Citizens for Tax Justice contributor David Cay Johnston, Corporate America is sitting on a significantly larger pile of cash than readily available numbers suggest, and the reason this isn't translating into jobs is because they have no reason to invest it.

Under normal circumstances these piles of cash would be taxed, providing an incentive to invest it rather than hoard it. But according to Johnston, it isn't being taxed because the bulk of it is parked off-shore.

(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. [...]

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. [...]

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.

Corporate America has enough cash on hand to pay for their federal income tax bills 34 times, but, you know, we can't raise taxes by even 3 percentage points because that would just be socialism.

Obviously you can't blame just corporations. Congress and citizens are also partially responsible, because we vote for congress and congress enables this kind of behavior. It is our duty to elect a better congress. And it would be irresponsible not to point out that Mitt Romney would not only ensure this kind of behavior continues as president, he may even make it worse.

How could he make it worse? He could sign a corporate tax holiday into law passed by a Republican congress that would allow corporations to repatriate these vast piles of cash tax-free. Republicans in congress have already pushed for this, but the Democratic-controlled Senate and the president's veto pen prevents it.

A tax holiday would also allow Romney himself to repatriate the money held in his Bermuda holding company. Assuming he isn't still betting against the dollar.

  • Draxiar

    “America should be run like a business!”

    Yeah? Fuck You.

  • steven boivin

    “Tonight on TLC’s Hoarding:Buried Alive we have Willard, or Mitt as he likes to be called, a compulsive collector of money. We all need money of coarse but Mitt has a problem that has been neglected for years….”

  • OsborneInk

    It strikes me that the last point needs to be our thesis.