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Big League Economics

Core growth! Apple announces huge U.S. tax payment, new U.S. investments in plants, jobs

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The world’s leading technology company released plans Wednesday for its U.S.-based growth in the aftermath of President Donald J. Trump’s 2017 tax reform legislation.

“Apple is a success story that could only have happened in America, and we are proud to build on our long history of support for the US economy,” said Tim Cook, Apple’s CEO.

“We believe deeply in the power of American ingenuity, and we are focusing our investments in areas where we can have a direct impact on job creation and job preparedness,” he said.

(Graphic courtesy of Apple)

The company also announced Wednesday that it broke ground on a new facility in downtown Reno to complement its existing Nevada facilities.

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Later in 2018, Apple reveals the location of its new Apple campus in a new U.S. location, focused on house technical support for customers.

Apple is already the country’s largest taxpayer and it said the new tax law also led to the company’s decision to make a single $38 billion tax payment as part of Apple’s taking advantage of the law’s generous treatment of repatriation of foreign profits.

Before the tax reform bill became law, overseas profits were taxed at the straight 35 percent business tax rate without any possibility of deductions or other breaks to mitigate the hit. Because of this, U.S. companies, like Apple salted their overseas profits in low tax countries, such as Ireland.

Now, companies such as Apple, with more than $250 billion held overseas may bring these funds into the United States at a one-time 15.5 percent rate and tax-free afterward.

Businesses can then knock down that 15.5 percent further by taking advantage at 100 percent appreciation for capital investments.

Apple said it planned to make capital expenditures and investments in American manufacturing over five years and continued to bring its overseas profits home.

The five-year total for capital expenditures in the U.S. could exceed $30 billion, the company said. These investments could create more than 20,000 new jobs in addition to the Apple’s current workforce of 84,000.

Conservative estimates put the total overseas reserves at $2 trillion,

Cook’s embrace of the new tax law is a stark contrast to the events of May 2013, when the Apple CEO was summoned to testify on Capitol Hill about his company’s avoidance of U.S. business taxes.

“We have a deep sense of responsibility to give back to our country and the people who help make our success possible,” said Cook, the man, who took over the computer and cellphone giant from its co-founder and long-time leader Steve Jobs.

 

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