Today 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?
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.
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.
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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