Apple Stock Buyback Bonanza Continues

By Chand Bellur

February 10, 2020 at 1:58 p.m. PDT

  • The 2017 Tax Cuts and Jobs Act (TCJA) lowered the corporate tax to 21%, along with new regulations that imposed taxes on offshore holdings.
  • Apple and other corporations repatriated record cash holdings over the past few years.
  • The bulk of repatriated cash has been spent on stock buybacks, not on job-creating investments.

Apple’s Aggressive Stock Buyback Program

Corporations with hoards of cash have a few options. They can hold on to the money, often in overseas financial institutions, to avoid taxation. Corporations can reinvest their cash in their own enterprises, creating employment in the process. They can also buy back stock, which boosts the stock price, but has little value to most Americans.

In 2017, Congress passed the Tax Cuts and Jobs Act (TCJA). Part of the legislation was aimed at repatriating overseas capital. The law lowered the corporate tax rate from 35% to 21%, which encouraged corporations to repatriate overseas cash. Furthermore, the bill allowed the federal government to asses taxes on overseas assets.

To some extent, the TCJA worked. Corporations brought back record amounts of overseas cash. Most of the money, however, was allocated to stock buybacks, and not job-creating investments in business expansion. Many analysts predicted this outcome, as previous “tax holidays” resulted in the same behavior.

Apple’s own stock buyback program seems to have increased greatly during the past few years. December 2019 saw the Cupertino company repurchase a whopping $20 billion in shares. Repurchasing shares contributes significantly to Apple’s astronomical stock price, however, the fundamentals don’t justify this outlandish valuation.

Tim Cook Only Promised to Repatriate Cash

Apple is a large, public, multinational corporation. They’re guided solely by profits, not patriotism or altruism. Tim Cook adamantly refused to repatriate Apple’s accumulated overseas cash reserves, until the corporate tax rate was slashed:

“We’ve said at 40 percent, we’re not going to bring it back until there’s a fair rate. There’s no debate about it. Is that legal to do or not legal to do? It is legal to do. It is the current tax law. It’s not a matter of being patriotic or not patriotic. It doesn’t go that the more you pay, the more patriotic you are.”

Political economists often claim that the difference between Democrats and Republicans is akin to the difference between Tweedledum and Tweedledee. This is a correct assessment of corporate taxation, where both 2016 presidential candidates indicated a will to cut the corporate tax rate.

“Cook is right to be optimistic: Hillary Clinton has hinted that she’ll push for exactly this in her first 100 days in office, while Donald Trump has said explicitly that he wants to make it happen. Moreover, in the interview Cook also notes he’s gotten advice on how to handle this issue from both Goldman Sachs CEO Lloyd Blankfein and Bill Clinton.”

Buttering their bread on both sides, large corporations are well known to donate to both political candidates, expecting favors in return. Apple has donated money to both Hillary Clinton and Donald Trump, however, Clinton earned much more from the Cupertino company.

In the 2017 campaign cycle, Apple donated almost $700,000 to Hillary Clinton and a little over $5000 to Trump. Although one side of bread had more butter than the other, like most corporations, they donate to both candidates.

Influencing politics through campaign contributions is the rule, not the exception. Apple is accountable only to shareholders — not to the United States or its people.

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