Charleston native John T. Chambers Jr., CEO of the international Cisco electronics colossus, says Cisco will continue keeping nearly $40 billion overseas and won't create more U.S. jobs unless America's corporate tax rate is lowered from its 35 percent level. By funneling profits into foreign operations, U.S. firms create jobs abroad and avoid high U.S. taxes.
The brilliant tycoon -- who mushroomed Cisco from a $70 million firm in 1991 to $46 billion sales last year, and who constantly buys new corporations -- told CNBC he won't buy any further U.S. companies.
"Tax policy will determine where our growth and head count will be," he said. "I'm a very loyal American citizen and company, but in terms of future growth, unless tax policy changes, you will see that occur outside the United States .... Wherever we acquire is where our head count is going to be. If the majority of our money remains outside the United States, and this depends on tax policies, that's where you'll see us acquire going forward."
For years, Chambers has been diverting Cisco wealth to low-tax foreign countries -- and calling for cuts in U.S. corporate taxes, to make such "offshoring" unnecessary. After his CNBC appearance, Business Insider reported:
"Cisco has $46 billion in cash, but CEO John Chambers says he is no longer willing to use it to acquire U.S. companies. That's because 80 percent of that cash is stored in overseas accounts, and if Cisco spends it in the United States, the company will have to fork over 35 percent in taxes."
What a dilemma. We believe the former Charlestonian's assertion that he's "a very loyal American citizen" and we understand why he wants to invest Cisco money abroad to avoid steep U.S. taxes. Various other large firms do likewise. CNBC reported:
"U.S. companies have about $1.7 trillion offshore. For instance, Microsoft keeps about 87 percent of its $66.6 billion stored outside the United States; Oracle 80 percent of its $31.6 billion; and Apple about 68 percent of its $121.3 billion."
If U.S. firms brought that $1.7 trillion home to America, think of the huge business operations and thousands of American jobs -- or "head count," as Chambers said -- it would create.
Actually, accounting tactics enable most large U.S. firms to pay less than the 35 percent tax rate. But still-lower rates in the Cayman Islands and some European nations nonetheless draw U.S. corporate wealth overseas.
The Obama administration is well aware of the offshoring quandary. During his State of the Union speech, the president said:
"The American people deserve ... a tax code that lowers incentives to move jobs overseas, and lowers tax rates for businesses and manufacturers that are creating jobs right here in the United States of America .... Over the years, a parade of lobbyists has rigged the tax code to benefit particular companies and industries. Those with accountants or lawyers to work the system can end up paying no taxes at all. But all the rest are hit with one of the highest corporate tax rates in the world. It makes no sense, and it has to change."Bravo. Maybe Obama can appoint former West Virginian Chambers to a national brain trust to figure how to recoup the $1.7 trillion now lost to the U.S. economy.