GO
Loading...

Kneale: Cisco’s Stimulus Plan Won’t Cost You One Dollar

Friday, 24 Sep 2010 | 2:25 PM ET

Just spoke to Cisco chief executive John Chambers here at CNBC headquarters, and he has a new stimulus plan for America—one guaranteed to create hundreds of billions of dollars in cash flow without costing the taxpayer a single dollar in new spending.

Cisco Systems chairman and CEO John Chambers speaks during a press event at the 2010 International Consumer Electronics Show in Las Vegas, Nevada.
Getty Images
Cisco Systems chairman and CEO John Chambers speaks during a press event at the 2010 International Consumer Electronics Show in Las Vegas, Nevada.

The Obama administration wants to “crack down” on tax loopholes to skim a bigger chunk of the profits that U.S. titans earn overseas and bring back to the U.S. Chambers proposes just the opposite: Slash tax rates on overseas earnings to only 5 percent or so from 35 percent, and a windfall of cash will come home.

Chambers, here for a private lunch with CNBC staff, told me beforehand that some 650 U.S. companies have socked away $1.2 trillion in cash overseas. Just the top 75 U.S. giants have collectively $1 trillion in offshore accounts.

But they don’t bring it home because the feds would skim $420 billion of it right off the top, at a 35 percent tax rate.

The feds “are never going to get those companies to bring back that cash at double-digit tax rates,” Chambers says.

The last time Treasury tried this tax-slashing approach, in the 2004 Jobs Creation Act, 55 companies brought home an estimated $800 billion in cash, Chambers says.

“That’s more than the entire stimulus package,” he told me. “This is the easiest job of stimulating the U.S. economy—and it doesn’t cost the taxpayer $100,000 to $1 million per job the way the stimulus plan does.”

I seem to remember seeing smaller estimates—in the $350 billion to $400 billion range, but whatever. Amen, Mr. Chambers. Amen.

Chambers points out the U.S. is the only country in the world that taxes its home companies on profits earned outside its own borders.

It’s rather perverse when you think about it: This money already was taxed once by the local government where it was earned. And the U.S. government incurred no costs related to that cash, in terms of infrastructure or security or defense.

No wonder, then, that so much U.S. corporate cash sits idle overseas. Microsoftthis week issued $4.75 billion in bond debt to raise cash in the U.S., despite already holding almost $37 billion in cash, most of it offshore.

In five years or less, the Cisco chief predicts, overseas governments could begin demanding that U.S. firms reinvest, in each overseas nation, a hefty slice of the profits they earned there. Why not slash the tax rate to 5 percent to bring that cash back onto our shores before those restrictions take hold?

The Cisco Kid’s push comes just as Loews Corp. CEO James S. Tisch opines in the Wall Street Journal today with an article hailing a similar low-tax plan. In it he cites powerful labor leader Andy Stern of the Service Employees International Union as supporting the idea—an extraordinary pro-business stance for any union man to take.

John Chambers is one of the best corporate CEOs in the world; his advice is good enough for me. But the Obama Administration is far cozier with, and attuned to, the bent and wishes of unions. So Andy Stern’s support for this tax cut may be even more important.

Hey guys—let’s take progress anywhere we can get it.

  Price   Change %Change
CSCO
---
L
---
MSFT
---

Featured

Contact Technology

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    › Learn More
  • Matt Hunter is the senior technology editor at CNBC.com.

  • Cadie Thompson is a tech reporter for the Enterprise Team for CNBC.com.

  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.

  • Jon Fortt is an on-air editor. He covers the companies, start-ups, and trends that are driving innovation in the industry.

  • Lipton is CNBC's technology correspondent, working from CNBC's Silicon Valley bureau.

  • Mark is CNBC's Silicon Valley/San Francisco Bureau Chief covering technology and digital media.