The five companies all have huge reserves of cash and used it to spend more than $115bn during the first three quarters of 2018 on buying back stock. President Trump’s tax laws came into effect in late 2017 and it is clear tech giants are benefitting. A report in the Financial Times says stock buyback numbers for the five companies is nearly double what it was during the entirety of 2017. “Most companies are using cash to buy back stock and make acquisitions, rather than invest in new facilities,” said Walter Price, a tech investment manager at Allianz in an interview with FT. “I think this is good for shareholders and management.” Trump sold his tax reforms as an answer to the working Americans’ dream, giving the nation a jobs boost. There was always an underlying worry that the new laws would benefit the rich, and especially rich organizations.
Tax Game
Microsoft, Apple, Alphabet, Cisco, and Oracle fall under the category of rich organization. Each tech giant has stockpiles of cash and with money to burn they have turned to their own stock. It has been an effective strategy that has seen the combined capital of the companies increase 42 percent compared to last year, now at $42.6bn. It is perhaps ironic that the reason the companies were sitting on piles of cash was because of playing the previous tax system. Indeed, much of the money was held offshore and escaped tax. President Trump’s Tax Cuts and Jobs Act changed the game, but it has still allowed tech giants to play.
