Nov 8, 2016 — by: Mark Reschke
Categories: Financial Results, Investors, Jobs, Steve Jobs, MacBook, Predictions, Tim Cook

Trump_clinton_appleToday is the day where many citizens in states across the country set off to the voting booth. Baring some form of miracle, Donald Trump or Hillary Clinton will become the 44th President of the United States of America. For this moment I'll be setting ALL political thoughts aside, save for one: Which President elect's tax plan would benefit Apple the most?

Donald Trump: 

Trump's offshore tax policy states it will reduce the Federal repatriation tax to 10%. Tim Cook, when testifying before Congress in 2013, believed a fair tax rate would be around 26% (state and fed total), which is typically Apple's domestic tax rate in any given quarter. If Trump became President and was able to pass a 10% repatriation tax rate, Apple would likely move most, if not all, of their offshore holdings back to the US. This past summer the European Union (EU) pushed into Ireland's banking laws, demanding Apple pay the EU $14.5 billion in taxes. Trump's policy would likely motivate Apple all the more to move their holdings back into the states and out of other countries, where Apple's cash is vulnerable to swiftly changing perceptons and laws.

Apple's current offshore cash is just north of $180 billion dollars. Apple's ability to repatriate this money via the 10% tax would open up many financial doors for the company. Apple would no longer need to borrow money to pay shareholder dividends. The company could also expand their options regarding which types and sizes of companies to buy out, if or when choosing to do so, without the need to borrow.

Trump also wants to reduce corporate tax rates from the current 35% to 15%. This would certainly drive more margin into Apple's profit line, while also giving them flexibility to lower prices and increase sales (MacBook Pro anyone?).

On the other side of Trump's tax policy, he has also promised to impose tariffs against Chinese and Mexican produced goods. The policy could greatly impact Apple's margins and sales prices of virtually every device the company manufactures in China and sells into the US to great negative effect for Apple. Trump's tax cuts could be largely offset with expansive tariffs. 

HILLARY CLINTON: 

Clinton is against lowering the repatriation tax, and instead wants to introduce an "Exit Tax" for any company deciding to leave the US. Companies would not be allowed to leave the US until they repatriated their off-shore earnings. Apple would gain nothing from this policy in terms of flexibility as a corporation (should they ever want to leave the US), but it also does nothing to aid in repatriating their off-shore capital.

Clinton has not pushed for the tariffs Donald Trump wants to impose, which would leave Apple's margins and product pricing stable for US customers. However, Clinton has backed off her support of TPP (Trans-Pacific Partnership), a pact that includes 11 nations and the US. What this would do long-term to Apple's imports is unknown, and what Clinton would replace it with has been vague to this point.

Another Clinton policy is to leave the US corporate income tax rate at 35%. Apple, like any corporation, uses deductions and financial tools to lower their effective tax rate down overall. Clinton's plan would simply leave Apple as-is.

FINAL ANALYSIS:

Looking at the election on only a pure Apple advantage viewpoint, Trump's tax plans would benefit Apple in terms of providing them much greater financial flexibility and growing profit margins. Under Trump's plan, Apple could lower prices while maintaining the same profit margins (if the market suggests they do so). An attractive option for shareholders is the fact Apple would have more on-shore cash to pay out larger dividends. Clinton's plan leaves Apple largely as-is. Bottom Line: Trump's tax plan will simply benefit Apple more than the Clinton plan. Everything else about Trump and Clinton? Well, that's an entirely different story.

 

Disclosure: Mark Reschke owns AAPL shares.

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3 Comments

  1. ViewRoyal ~ Nov. 8, 2016 @ 9:45 am

    "Trump's tax plans would benefit Apple in terms of providing them much greater financial flexibility and growing profit margins." That is IF YOU COULD TRUST everything that Trump has said! If you believe that Trump is going to build a multi-thousand mile long wall along the US/Mexican border, and have Mexico pay for it... You can ALSO believe that Trump would pass a 10% repatriation tax rate. #
  2. RE: ViewRoyal ~ Nov. 8, 2016 @ 10:10 am

    RE: Royal View. I never said I believed what ANY candidate has stated in their tax (or other) policies. That would be me making assumptions of both. Rather, I simply and looking at what they have stated. I make no assumptions nor do I project onto either candidate what I believe they will or will not do. I simply am looking at their policies - period. As for my opinion (which I doubt many people care about), is that a major problem the voting populous has is casting their ideals and believes on candidates and what that then means they will - or will not - do. It is called projecting. I'm not doing the here. I am just looking at the policies, nothing more. Thanks RV for the feedback. #
  3. ViewRoyal ~ Nov. 8, 2016 @ 11:12 am

    " I am just looking at the policies, nothing more." Precisely! It is important, however, NOT to take election promises (especially ones that are absurd) at face value... Particularly those that are made by someone who has a record of repeatedly making false and misleading statements, and makes promises that any rational person knows are blatantly impossible (or at the very least, incredibly unlikely to ever be fulfilled). The problem with "just looking at policies", and NOT questioning their veracity, is that is exactly what all of Trump's supporters are doing. They take everything that he says at face value, and they have no mental filter to separate what is real from what is fiction. Just because Trump (or even a more rational and trust-worthy politician) makes campaign promises... In the end it is worth nothing. Everything a politician "promises" during a campaign is (at best) intention, nothing else. Political candidates say what they will for only one reason (obviously), to get votes. We vote for the candidate that we believe will be the most competent... NOT for the candidate that makes the most promises. What truly counts is what gets accomplished during the winning candidates term in office. If a person is trustworthy, they can be held accountable for campaign promises, and (hopefully) they at least partially fulfill some of those promises. If a person is not trustworthy, it would be futile to expect any of their campaign promises to ever be achieved. #

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