What Will Tech Giants Do With Tax Cuts?

Apple, Cisco Systems and other big tech names disclose their plans.

When the current US administration voted to enact a massive tax cut plan, a lot of people were outspoken about its shortcomings. The general theme seemed to be that it created more of the “trickle-down economics” that experts have warned simply doesn’t work. The average working person’s life won’t change in any way, while the owners of these massive corporations will benefit in the billions of dollars.

In theory, the tax cuts are supposed to result in more money being given to the workers themselves. A few companies did provide some highly publicized Christmas bonuses, but even more companies announced massive layoffs instead.

Just what will the tech giants do with these juicy tax cuts?

IRS deal

One tech giant, Apple, initially issued a statement to the effect that it would be bringing billions of dollars to the economy and hiring as many as 20,000 new US employees over the next five years. However, industry experts have picked apart the wording behind the announcement: many of the billions of dollars that Apple will be investing stateside comes in the form of $252 billion that Apple has previously been hording overseas without paying taxes on it. The tax plan bill and resulting deal with the IRS means Apple can bring that money to its coffers in the US while only paying $38 billion in taxes on it.

Cisco Systems

Other tech companies have announced their plans for this government-issued windfall. Cisco Systems announced a buyback of its stock in the amount of $25 billion, as well as planned increases in its per-share value (again, awesome news for those with money in the stock market, not so earth-shaking for the average employee); several other companies of varying sizes and cash-holdings are expected to follow suit, just to keep shareholders interested and invested.  Another concern is that this tax break may actually lead to future financial woes for the tech giants as they use those funds to buy up other companies, spreading themselves a little thin.

Change unlikely

According to an interview with Andrew Chang, S&P primary credit analyst by Joseph DiStefano for The Inquirer/Daily News Philly, “There is unlikely to be any meaningful change to capital spending, to research and development, to hiring people. [After years of record profits and cheap interest rates]… companies that have a lot of cash overseas, even prior to repatriating it to the U.S., already had access to capital. If they wanted to build new foundries and factories, they would already have done so.”