Essay about Economic: Money and Companies

Submitted By raymondjbradshaw
Words: 449
Pages: 2

The article titled, “Why Investors Can't Get More Cash Out of U.S. Companies,” shares some interesting facts about current US companies. It states that some of the most successful companies in the US have been and are continuing to borrow funds to support their operations. In particular, Microsoft, one the most well known companies are also included in the list; just this year alone, the report is that they’ve borrowed $2.25 billion to run the company. What’s puzzling about this fact is that Microsoft has $40 million in cash equivalent but is still borrowing heavily for some odd reason. The article explained that companies, including Microsoft, are doing this for a purpose, and the purpose is to avoid a big tax bill to the US government.

Since tax laws are very complicated, the article did not specify what exactly about our tax laws that prevent companies from bringing cash onto their balance sheet; but what we do know is that, the main reason why companies are borrowing instead of liquidating their foreign securities and bring the funds onshore, is because the US has one of the most highest tax rate for foreign investments in the world. Large companies, who hold investments globally, are already being hit with the foreign taxes; if they were to cash out and bring the proceeds to the US, they would have to pay another large tax bill to the government before even touching the funds. For this reason, the companies prefer to leave their investments oversea, and capitalize on its growth rather than taking it home and being able to use most of it.

A surprising fact stated in the article was that the United States is the one country that has the highest tax rate charged to its home…